George Niece ⋅ Saint Paul, MN eGlobal Solutions ⋅ 20 years experience

Hi Michael,

As someone who has been part of multiple startups, including a franchise, I'd say it depends on the business opportunity. The most likely situation is going to be a bit of both. In most businesses you need enough money to foot the bills without being in the black for at least 1-2 years. Without knowing what type of franchise opportunity you're considering or the bottomline investment, I'd say that you should use enough of your capital to get the best rate.

Where you get the loan is also important. If you have an existing relationship with a credit union, that would be the way I'd go, but you'll need to do your homework on getting the best rate. Don't accept the first answer, from myself or anyone else. Owning your own business is amazing when it goes well, and really sucky when it goes poorly.

Find a qualified accountant, again, check references and make sure that you get someone who has at least one or more customers who own franchises. Assumedly they will know of additional tax shelters that would be available in New Jersey, or where you're going to open your franchise operation.

You'll also want to check into the corporate structure you're going to use to house the franchise, incorporating is simple without legal assistance, but knowing whether you want to be an LLC, S-Corp or C-Corp is really important to long term tax and financial consequences.

Third to last, is going to be employees, if your franchise needs them sooner or later. This can have lasting consequences and significant impact on your business, both positive and negative. Employees are required if you are buying a Franchise that you're not familiar with as a business.

Second to last, location. Location for some types of Franchises is key, so know the area you're in and definitely negotiate like it's your last dime for any type of leased space, signage, or anything else regarding your business.

Lastly, if you don't like to haggle/negotiate, then you will need someone on your team who does. It is absolutely a required skill in small business.

Finally, if you're going into business with anyone else, make sure that all transactions require at least 2 signatures, or you'll learn that the hard way.

In all the above areas, remember some sage advice that I credit to Ronald Reagan, Trust but Verify. This is the most important part of being a business owner of any type, although hard work, patience, perseverance, and luck all play their part.

So in order,
1. Form your corporate structure
2. Open your business bank account
3. Buy your franchise
4. Work hard for years, hopefully with realized benefits from the investment

Best regards,
George

Heather Gillbanks ⋅ Houston, TX General Electric ⋅ 26 years experience

I am not certified in the US as a planner, but ... I strongly recommend you find yourself a fee-for-service financial advisor, who is not tied to a specific financial firm. Pay them to run the numbers for you, to determine if a loan is to your advantage, given the specifics of YOUR financial situation, the business opportunity, current climate (economic conditions), etc.

Michael Ciaccio ⋅ Monroe Township, NJ U.S. Marine Corps, Sergeant ⋅ 4 years served

Thanks for the answers guys.

Kevin Wiley ⋅ Kingston, WA Ameriprise Financial ⋅ 4 years experience

Michael,

I agree with many statements above but it comes down to what you are starting. Each type of business is different and can be financed in different ways. If you would like to explore this further I would be glad to help.

Kevin Wiley
Financial Advisor

Morgan Stanley Wealth Management
2011 NW Myhre Road, Suite 301
Silverdale WA 98383
Office 360 613 1975
Fax 360 613 1992
TF 800 447 6021
Kevin.wiley@morganstanley.com

Cliff Sullivan ⋅ Largo, FL Internal Revenue Service ⋅ 50 years experience

One of SCORE.org's National Partners is www.frannet.com, Franchise consultants, who come to you at no cost, since they have contracted with the franchisor and are paid from the franchise fee which you would pay anyway and get no personal consulting. Veterans often get a discount on franchise fees..check that out. Join the www.navoba.com, National Veteran Owned Business Association for $29 per year and get a great magazine with stories and contacts. See your local SCORE mentor for personal mentoring.

Tae Kim ⋅ New York, NY U.S. Marine Corps, Corporal ⋅ 4 years served

I do not have any experience with any business, but from what I've studied so far, it is better to take out a loan even if you can fully fund it. The taxes you pay on your loan are tax deductible and you have leverage; if you can fully fund 1 franchise store, and you take out a loan for 50%, then you can have 2 instead of 1!!!. You will however, add more risk. but considering you are a veteran, and if you can borrow money at lower cost than average, you should definitely take out a loan. Just summarized what was on my text book but hope it helped