Call it trite. Call it a cliché. Call it whatever you want, but the old saying is true: It takes money to make money.
A franchise is a great way to make a living, to support your family, and to plan for your golden years. The hard part for many entrepreneurs isn’t running their businesses; it’s finding the capital to get the enterprise off the ground.
According to statistics from the Small Business Administration, a third of all businesses will fail in the first two years and only 44 percent survive four years. There are a variety of reasons businesses don’t make it beyond the first few years, and many of them tie back to the money. Inadequate funding restricts opportunities in a variety of ways.
Here’s a look at the top seven ways franchise operators can find the money they need to keep the Bin doors open.
Sell Unneeded Items
eBay has made a fortune from people selling items they no longer want or need. There are your prized baseball card or comic book collections, that tract of land left to you by Aunt Tilly, furniture that might otherwise eventually have ended up in one of our very own Bin There Dump That dumpsters. If you’ll forgive the paraphrase: One person’s trash can be another person’s startup capital.
There are often many items around the house that have not only sentimental value; they have financial value, too. Consider parting ways with them so that you can get a new business under way.
Borrow From A Retirement Plan
We spend most of our working lives working — hopefully doing something we love — with the goal of earning enough to live out our retirement years comfortably.
In 1978, Congress amended the tax code, and a clever financial executive recognized the opportunity to create what today are known as the 401(k). These ubiquitous accounts, as well as Roth IRAs and other retirement accounts, provide many people with at least a significant portion of the money they’ll use once they finish working.
That money in your 401(k) can be borrowed for a variety of purposes, including starting a business. There are numerous caveats regarding borrowing against a 401(k) plan, so it’s best to consult a professional financial adviser before doing this.
Home Equity Line of Credit
A home equity line of credit is a fantastic way to fix up a house — to get new siding, repair the driveway or put on a new roof. It can also be used to help get a new enterprise off the ground. Like with any source of funding, do your homework. There are a number of institutions that can offer home equity lines of credit: banks, credit unions, savings and loans, mortgage companies. The difference between what you owe on your house and what it’s worth might be just what you need to get your franchise started.
Angel Investors and Venture Capitalists
Angel investor: The name suggests something heaven sent. And under the right circumstances, that might be the case. Angel investors are wealthy individuals who provide funding for a percentage of your company; they’ll sometimes provide capital if even the idea for a business appeals to them. Venture capitalists prefer joining the process later, once there are proven results — they’ll also generally want more stake and say in the business.
You might be able to find an angel through a local chamber of commerce or trusted business adviser. Many communities have small business development centers or a similar organization to help new entrepreneurs locate investors.
Maxing out your credit cards is another business cliché, but there’s a reason it’s a cliché — so many people have done it. The nice thing about credit card debt is that the monthly payment can be quite low. But paying just the minimum means the payback period can literally extend decades, and the ultimate cost of that loan is considerable.
Bank or SBA Loan
Banks are one of the most traditional forms of lending and they’re equally notorious for refusing new business owners money. Banks like to see history, a track record of success, which is, well, impossible if you’re a start up. You also need collateral, which means putting up a valuable asset such as a home.
The role of the Small Business Administration might best be described by its own website: “The programs are many and varied, and the qualifications for each are specific. SBA can help facilitate a loan for you with a third party lender, guarantee a bond, or help you find venture capital. Understanding how SBA works is the first step towards receiving assistance. SBA provides a number of financial assistance programs for small businesses that have been specifically designed to meet key financing needs, including debt financing, surety bonds, and equity financing.”
Remember the heady days of the early Internet? We were going to have paperless offices, AOL was a huge deal, and brick-and-mortar businesses were going to be a thing of the past. So, not every promise came true, but the Internet has created extraordinary opportunities that simply didn’t exist even a decade ago.
With a good idea and a bit of salesmanship, you might just be able to finance your business from people around the world. Crowdfunding is the modern-day version of borrowing a little bit of money from everyone you know. Crowdfunding websites have brought that fun to the Internet. There are many websites that allow crowdfunding, and all offer ways raise money for an enterprise. Each site has its own rules and restrictions — some limit projects to creative endeavors, for instance — so make sure to read the terms before jumping into it.
Take The First Steps!
Starting a franchise operation with a company like Bin There Dump That requires tens of thousands of dollars in startup costs, but if you’re established in business or feel comfortable using one of these funding strategies, your efforts can yield huge profits down the line!
Interested in learning more about becoming a Bin There Dump That franchise operator? Download our free Franchise Information Kit. And if you’re ready to explore your future as a franchise operator, take our Franchise Personality Test for unparalleled insight into your potential.