Show Me the Money You don't need big bucks to start a franchise--you just need the right source of funding.

Editor's note: For more information on financing your franchise, go to financing options.

It takes a substantial amount of money to buy a franchise, not to mention cover the costs of supplies, overhead and, in some cases, building a location. Understandably, many franchisees find that kind of capital tough to secure. But rest assured: If you're considering buying a franchise, money doesn't have to be an object. Throw away any preconceived notions about needing to be born rich or have $1 million in savings to get into franchising-these franchisees are living proof that a dream, perseverance and financing options can create a perfect recipe for franchise ownership.

All Wrapped Up

When Stan Harris tried to purchase his Charlotte, North Carolina, Great Wraps, he had no luck securing a loan from financial institutions to fund his wrapped-sandwich restaurant. Even the bank where he worked as a mutual funds sales representative rejected his loan application. No banks provided Harris a formal reason for not approving the loan, other than they were unable to fund such a project.

His frustration mounted. "I put a lot of time and effort into creating my business plan and trying to make this happen," says Harris, 44. Rather than give up, he forged ahead, fired up by his belief that the wrap concept would explode in popularity in the near future.

"It's been my lifelong dream to own and operate my own business," says Harris. Growing up in Detroit, "most people thought once you graduated from high school, your only alternative was to work for GM or the other big car manufacturers," he recalls. "My father wanted me to avoid that path." Consequently, when it came to pursuing his franchisee dreams, even in the face of financial hurdles, Harris says he "was very persistent."

In all the time he spent pounding the pavement from one bank to another, Harris never stopped to consider the financial risk involved in making the move from employee to franchisee. "Honestly, I only thought about opening up my Great Wraps and being successful," says Harris. He hoped his change of career could also provide his children with future opportunities.

Harris' luck turned around the very day he was turned down by the last bank he applied at. He had heard about community development lender Self-Help Credit Union and called them up immediately. With a mission to create ownership and economic opportunities for women, minorities, rural residents and low-income families, Self-Help asked Harris to tell them the actual costs of the franchise and location. After Harris came up with a number-$200,000-the SBA underwrote a loan through Self-Help to finance him as long as he came up with 20 percent of the sum, which he gathered from his savings and 401(k).

Harris' experience taught him that loan approval requires several components: an excellent business plan, good credit and the ability to contribute a portion of the financing. "I've learned that everyone wants to know what you're willing to put on the table before they're willing to make a contribution," says Harris. He also received some sage advice from his wife: "To have people believe in your dream, you have to believe in yourself." He's glad he went the extra mile to make that dream a reality.

Smoothie Sailing

Lei Kaniaupio and Dmitri Spadaccini knew they were facing some heavy competition with their Robeks franchise in Honolulu, but the husband-and-wife team believed in the concept. A business development employee turned stay-at-home mom, Kaniaupio loved that the smoothie franchise was a lifestyle brand promoting healthy eating and living. "Hawaii's market is so perfect for this product," says Kaniaupio, a vegetarian. "It's not just smoothies-it's sandwiches, soups, muffins, etc. Our whole concept is based on this healthy attitude." Kaniaupio and Spadaccini, a former general manager facilitator, decided they wanted to be franchisees and regional directors for the franchise in Hawaii, which essentially meant they needed not one, but two loans.

While Robeks offered a few financing options, Kaniaupio, 42, and Spadaccini, 40, quickly found out those options wouldn't work because the couple was thousands of miles away from the contiguous United States. Initially, their island paradise home appeared to work against them-that is, until Bank of Hawaii, which is widely known to be one of the most conservative banks there, granted the couple a loan. Says Kaniaupio, "The fact they actually funded us was quite a feat."

When starting the financing process with Bank of Hawaii, Kaniaupio found herself in a Catch-22. "The bank wants you to have a location set and all your facts and figures based on that location. The landowners or managers want to know you have your financing, so it's a tricky balance." She was able to get both sides to work with each other and is now in negotiations with some Hawaiian property managers to eliminate this hurdle for future Robeks franchisees.

Another problem came with the large loan amount. Initially seeking 100 percent financing, "I realized it would take my firstborn as collateral," jokes Kaniaupio. "There's a big difference between partial and full financing." The couple instead received $135,000 in financing through Bank of Hawaii. The rest came from savings and family members.

As far as funding for the regional directorship, Kaniaupio turned to a government agency, the Office of Hawaiian Affairs, wanting to keep her franchise loan separate. "OHA is very into helping Hawaiian entrepreneurs," says Kaniaupio. She took a required eight-week course before getting approval for a loan set at 2 percent for five years, with the first six months being interest-only. OHA funded the maximum of $75,000; Kaniaupio and Spadaccini came up with the rest from savings and family.

With all the financing obstacles they've overcome, Kaniaupio and Spadaccini believe they've truly blazed the trail for any future Robeks franchisees in the state. "We're opening the way for people coming on," says Kaniaupio. "They'll see how an existing business is doing and will have something to compare [their businesses] to."

Heavy Metal

Before getting laid off in 2000, Henry Niedzwecki had spent most of his career selling different types of equipment in the welded steel industry. After studying the job climate and evaluating other sales positions, Niedzwecki, 56, deduced, "I was not the right guy at the right time." He decided he would instead purchase a machinery-related business or franchise and stay within his comfort zone. He happened upon metal retail franchise Metal Supermarkets while searching online, and he set up a meeting with the franchisor. "They were the kind of people I've been doing business with the past 20 years," he says. "It was an immediate fit."

Using money from an inheritance, Niedzwecki's wife, Susan, covered the $35,000 Metal Supermarkets license fee. When it came to total startup costs, however, the franchisor estimated it would take about $250,000. The couple used savings and an IRA account to contribute about $90,000. Niedzwecki's brother-in-law had encouraged him to look into running a business and was willing to invest. With two other minor investors-his sister-in-law and his wife's aunt-they came up with an additional $60,000.

Niedzwecki got the remaining startup funds from a bank loan. Seeking $100,000, he found the regional and statewide banks weren't interested in such a small amount. While his community bank was smaller, Niedzwecki found their enthusiasm to work with him a draw. "My perception going into this was not that I was begging for money-it was, 'I'm starting a business, and I'm looking for a banking partner.'"

Niedzwecki took his attorney's advice and created an LLC to purchase the franchise, which opened in Nashville in 2002. "We structured an agreement whereby I was to buy a specified proportion of everyone's shares over a three-year cycle beginning this year," he explains. "Going into business with family is fraught with all sorts of perils. Have a strong but flexible agreement. It's not just a good idea-it's a necessity." Niedzwecki gladly reports his has stayed one happy family.

Having Fund Yet?

Frank Roth, senior vice president of global marketing for GE Commercial Finance, Franchise Finance, offers the following tips on finding franchise funding:

• Find out whether your franchisor provides resources to help you with financing. "Lean on the franchisor as much as possible," says Roth. "They know the unique situations, they'll potentially know the geography you're going to open in, and they have relationships with banks or finance companies."

• Visit your local bank. Roth points out that they may be more willing to lend to you based on your individual merits rather than evaluating the industry or strength of the brand. "Use one you have ongoing relationships with, and leverage that one way or another." Roth adds that any relationship with a financing entity, whether it's through a car loan, home mortgage or banking account, is a potential resource.

• Check out franchise finance lenders. Whereas banks and financial institutions typically "look at it as investing in the individual," says Roth, a franchise finance lender "is already familiar with the industry segment and the brand and would focus on that." He points out that franchise finance lenders might take on someone with less equity and more experience if they're comfortable with the brand.

For more information on financing your franchise, visit our franchise financing options page here.