What is the most common way your clients finance their franchise ventures?
Well, once again, because I am not a big believer in debt, I have advised many franchise prospects to considered the independent path to entrepreneurship if they cannot qualify easily for financing.
I do not sell franchises or represent franchisors as a broker, I only provide due diligence services to prospective franchisees. Therefore, I do have the luxury of suggesting that a person “not” go forward with a franchise purchase, or at least clearly raising a red flag when a particularly heavy debt load is apparent. Sure, one can hock the family home, or cash in all of their retirement, but is that a good bet? In some cases yes, but in most cases it is not.
Anything beyond sound financing practices is not terribly wise in my opinion. So, even though it is possible to borrow against a retirement fund, or re-mortgage to the neckline, I always ask if the downside is worth the risk. If a person cannot afford a franchise, a house, a car, or anything else under normal, practical terms, it is a pretty good sign that pushing the envelop via “creative financing” is probably worth a second or fifth look.
For more about Nick Bibby, click on bibbygroup.com.