Before settling on the franchisor's recommended financing sources, however, check out all your options. "Shop, shop, shop," urges Howard Bassuk, president of the Franchise Network. "There are many choices in lenders, just as there are many choices in franchises. You should devote as much time and effort to finding the right loan as you devoted to finding the right franchise."
Bassuk, whose worldwide chain of franchise brokerage offices is based in San Diego, suggests first asking the franchisor for financial support. "[Then] call or visit banks, loan companies, leasing companies, brokers, local business development groups, friends, relatives, pension plans, credit unions, mutual funds--anyone who may be in a position to lend money," he advises.
While some major banks may not make franchise loans, "Virtually any bank that makes SBA loans will certainly consider making a franchise loan," says Bassuk. "After all, banks are in the business of making loans, and franchise loans are particularly attractive because the lender can track the experiences of other franchises in the system, evaluate the success of the concept and project future income."
Wherever you seek funding, remember that money is a commodity. Shop for it wisely. Negotiate. Make the best deal. Both you and your lender have something to gain from this transaction. "Don't walk into a bank or finance office with your hat in your hand," Bassuk counsels. "They aren't doing you any favors. They must lend money to stay in business, so present them with an opportunity to make a good loan, and they'll lend it to you."