How to start a franchise with no money
Not every aspiring entrepreneur or franchisee has the necessary funds to get started, despite their strong desire to do so.
In addition to this financial limitation, it’s also worth considering that as a prospective franchisee, you’ll also need to pay the franchise fee, the initial investment and ongoing royalties.
But where can you find opportunities where these initial costs are reduced or limited and where can you source this extra capital? Here are a few ideas for you to consider.
1. Start by looking at low-cost franchise opportunities
There are literally hundreds of franchise opportunities available in the UK today. And although each one varies in terms of franchisee fee and initial capital investment, there are low-cost opportunities that you can pursue on a part-time basis.
This is a great idea because it means that you don’t have to quit your day job just yet. It means you’ll have a stable income while building your business over time.
With such business growth comes the opportunity to accumulate more capital and funds so that you can put that forward for a full-time franchise business opportunity when you are ready.
Luckily, with our franchise portal, you can quickly and easily browse through low-cost franchise opportunities and those available on a part-time basis to help you dip your toes in the water without taking on excessive financial risks.
2. Look for franchise opportunities that offer franchisor financing
As part of your research process in the right franchise opportunity for you, you can also look for franchise brands that offer financing options.
These brands often recognise that many aspiring entrepreneurs don’t often have all the cash on-hand to make an investment even though they may be the perfect business partner.
As such, numerous franchisors offer to “lend” their new franchisees the capital required to get started with the promise that this money will be returned over time based on the profitability of the franchise’s business operations.
In such cases, it’s worth considering that you will need to have quite an impeccable credit score and history to prove that you are worth lending to and that you are responsible enough to repay the funds the franchisor has offered to lend you.
3. Consider getting franchise financing through a bank loan
One of the most attractive aspects of buying into a franchise network is the fact that they have a proven track record and are profitable businesses that are expected to continue with this level of success in the future.
In essence, franchises can be recession-proof and this makes them highly attractive to banks. Consequently, you may consider approaching a bank or lender to help you finance your costs. You should be able to pay the bank back the money with the results of your profitable business operations.
However, banks, much like franchisors who lend to franchisees, will look at your credit history, credit score and your ability to repay the funds lent. You therefore once again need an impeccable financial history to get this project off the ground.
4. Consider entering into worthwhile partnerships
Just because you don’t have sufficient capital to start up your franchise, doesn’t mean that someone you know doesn’t. This means that you can look to your immediate and wider network of family, friends, colleagues and acquaintances to help provide the financial backing you need.
When you enter into a partnership with your chosen partner, be aware that they will want to see a return on their investment. So you will need to be prepared to put in the work and ensure that your franchise operations are profitable over the long term.
This will essentially mean that your partner will be getting their initial investment back at the beginning and that your share of the profits will be smaller. It’s also worth considering putting in place a partnership agreement so that each party’s roles and responsibilities are clearly defined.
5. Think about getting a home equity loan
Our final suggestion is for those who have homes and who owe less on the home than its market worth. This difference is considered the equity you have on your home. And it is another important way you can access the necessary funding for your franchise venture if you have no or little capital on hand.
Yes, it’s important to note that this could be a risky move because your property is at stake if your business operations don’t succeed and you default on your loan repayment.
For this reason, many lenders typically don’t lend the full equity amount on the home but rather a portion of this. This should be good news to you though. Why? Because on the one hand, you will be taking out a smaller loan and secondly, you can pursue and proceed with your franchise opportunity, giving you a leg up and the chance to make back the money in a few months or years’ time.
The bottom line
Although it’s not always easy, there are options and opportunities for you when you consider opening a franchise with no money. These opportunities should be carefully explored and considered so that you make the right decision in your circumstances. Every entrepreneur’s situation is different and you need a solution that’s unique to you. For those who are looking for more ideas on funding franchise operations, then our resource on how to get funding to open a franchise will be quite useful.