Part III – The Financial Match
The final segment of this three part series, Buying a Franchise in Tampa Bay, will help you assess how to find a franchise that matches your current financial situation.
The first thing you need to know is that franchises come in all price ranges and many are scalable, meaning they can be started small and grown to the level you choose. Also, there are many ways to finance a business, including accessing your pre-tax retirement funds, without tax or penalty. Regardless of how you choose to finance your business, franchisors want you to invest some of your own money in that business. The general rule is at least 25% – 30%, with the remainder to be financed in the manner you choose. In Florida, I don’t need to tell you that money is not easy to borrow. So, it’s important to begin with conducting a personal financial assessment:
Know your net worth. Be realistic about the value of your home and other assets. Know how much of your assets are liquid, i.e., can be accessed or used as collateral for an investment.
Prepare a detailed and realistic household budget. Make sure you know what your expenses are on a monthly basis, and don’t forget to list other sources of income such as annuities, retirement income, etc. Don’t forget the need for emergency funds! How long can you live without taking money out of the business? You will want to be sure to select a business that allows you to meet these expenses while you are getting the business off the ground.
Know your credit score. To obtain financing in today’s environment, you must show you not only have the ability to repay the money, but have a history of doing so. Most lenders today are looking for a credit score in excess of 700; however, that can be negotiable, depending on other factors.
And, finally, how much money are you comfortable spending? The amount you are comfortable spending is not necessarily all the money you have: it’s the amount you can invest and still meet all your other financial obligations.
Now that you have completed all these assessments, you have a better understanding of what you want and how much you can afford. At FranNet, we help people from across the country find franchise business opportunities that meet their personal and lifestyle goals. If you are interested in learning more, please contact me at email@example.com (813)281-5473.
Written by Pat Deering, Owner, FranNet of Greater Tampa Bay