Finance Your Franchise

1. Talk to your franchisor before searching for outside financing; get approved or pre-qualified.

2. The most common source of start-up capital is friends and family. Use them.

3. Seek out lenders that understand not just small business but franchising as well.

4. Be totally honest and upfront with lenders. Hide nothing. Be prepared to explain everything.

5. Neatness counts. Fill out your credit and loan applications clearly. Typed is better.

6. Don't weigh down your loan application with attached documents.

7. Don't exhaust your liquidity by paying off outstanding debts before filing a loan application. Lenders want you to have capital available.

8. If you lack liquidity, find a partner with money.

9. Consider equipment leasing to conserve start-up capital and improve the appearance of your balance sheet.

10. Keep debts and expenses to a minimum. Many business owners take on too much debt, forgetting that cash flow must pay that debt.

11. Consider buying used equipment, furniture, vehicles, etc.

12. Let your fingers do the walking on the Internet before wasting time, energy, gas and phone calls. You'll find useful information. Some sites even allow you to file loan applications online.

13. Don't overlook angel investors and venture capitalists.

14. Avoid dipping into your retirement money or your kids' college funds. Any startup-even a franchise-is a risk.

15. Don't give up.

Source: The Small Business Encyclopedia, Start Your Own Business, Entrepreneur magazine and Entrepreneur's StartUps magazine.

Miss any sections of our Buying a Franchise How-To? Read our entire how-to:

• Part 1: Franchise Basics
• Part 2: Begin Your Search
• Part 3: Navigate the Paper Trail
• Part 4: Conduct Interviews
• Part 5: Finance Your Franchise