small business

Everyone knows the current lending environment is a challenge--especially if you're trying to finance a startup. Yes, there's still financing available for qualified people, but selecting the right funding strategy is more important than ever. It's time to get creative when thinking about financing options.

Despite what you hear on the news, money is available. There are institutions and individuals who haven't been affected by the housing market and still have money to lend. It's important to note, however, that we're seeing some big changes from traditional lending procedures in the franchise industry.

The first change is that it's more important than ever to start sourcing financing options before even choosing the franchise you want to buy. While historically we've seen much of the franchise finance market driven by home-equity lines of credit, this type of financing is more difficult to obtain in the current financial climate. Therefore, it's never too early to look into financing alternatives.

Another change is that your credit score is far more important now than it was even a few months ago. In today's climate, getting financing will be difficult with any credit score below about 700.

Also, once you've decided on your franchise and are approved for a loan, act on it quickly. Lenders aren't going to leave credit commitments outstanding for 30 days or more the way they used to; they want you to act in five to 10 days. If you don't take it, they'll cancel their offer and lend the money to someone else.

In the past, people relied on time-tested approaches for franchise loans; but in today's economy, you may need to get more creative. Here are three alternative funding sources to consider:

Franchise Funding Specialists
How do you know which finance options might be best (or even available) for you? Companies such as FranFund or Guidant, which live in this market every day, can explain potential strategies you can use in your financing efforts.

These companies typically have established relationships with various lenders that specialize in one or more types of franchise financing. They may also offer equipment-leasing options, signature credit lines, 401(k) rollover products, SBA lending, conventional lending, etc. Finally, they can tell you how much credit is realistically going to be available to you.

After gathering your financial information, the franchise funding specialists will formulate a lending strategy with you. Once you make the final decision to proceed, they will package your information and follow the process from beginning to end. Their knowledge and relationships in the industry are critical in expediting the transaction, and these companies typically don't charge a fee for their services until or unless you actually receive your financing. So the upfront risk to you is limited to a small amount of your time.

Cash is King
We've heard it before. Well, this is never truer than in uncertain economic times. Many executives have been or are going to be displaced in this market shakeup, and they often receive a significant amount of cash to help them transition out of their old jobs.

This cash can come in the form of severance pay (lump sum or otherwise). It can also come as benefit continuations, retirement account settlements or rollovers. Ask yourself how you're going to "invest" this cash in an effort to re-create your lost income or, better yet, build some additional wealth for your family.

Consider investing it in yourself by building a franchise that can support you. Many people, after considering this idea, come to the conclusion that they can produce at least as high a return using this strategy as they would in the stock market. They will also have far more control during the process.

from jelf elgin - entreprenuer.com