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Franchise Funding Terms – What Do They All Mean?

Most franchise candidates are not accustomed to the financing terminology that most franchisors will typically discuss in an introductory call. I will identify the most common terms for your review.

Liquid Capital: This is usually the amount of cash that is required to purchase the franchise and pay for other items without using a credit card.* This amount typically includes the items listed below and excludes: home equity, stock and mutual funds and credit cards.

Cash in a savings account/or checking account
Home equity line of credit
Money Market Fund

Total Investment: The total investment will include all the information contained in Item 7 of the Franchise Disclosure Document. You should allocate enough funds to pay for the following:

Franchise Fee
Travel Expenses
Rent / Tenant Improvements
Start-up Supplies and Inventory
Advertising, Signage and Graphics
Grand Opening Marketing
Business Permits, Licenses and Fees
Working Capital

Net Worth: The franchisor will usually request a Net Worth Statement before, or at Discovery Day, verifying a snapshot of your financial situation. Net worth is calculated by determining your assets and subtracting your liabilities, to determine what you are worth financially.

All your assets may include, but not be limited to the following:

Bond s
Real Estate
Life Insurance Policies
Art/Other Personal Items of Value

All Your liabilities may include, but not be limited to the following:

Mortgage Loan
Car Loan(s)
Child Support Payments
Student Loans

Knowing your financial picture before you head down the path of looking for a franchise will save you a lot of time. You can enlist the assistance of one of our franchise consultants to available to assist you with your search.

*Most franchisors do not accept the use of a credit card to pay for the franchise fee.

About the author

Sue Bennett

Sue has always enjoyed serving others in her various roles as a business owner and employee. Her broad business background includes experience in the financial services, insurance and real estate industries. She also authored a book, Jumpstart Your Life, 401 Ideas to a Winning Attitude, and inspired hundreds of individuals with her upbeat messages. Sue has spent her lifetime pursuing her dreams, but more importantly, she’s committed her time and knowledge to encourage others to become successful business owners.

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