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I'm looking at buying a franchise, is it best to pay cash or obtain a business loan?
Responses
Hi Jon. I'll answer with a question, if you have cash why would you take a loan... no tax deduction or any other offset accounts for 100% of the expense?
Regards Ariel
Before buying a franchise you should be seeking professional legal and accounting advice. You should ensure that you have sufficient liquidity both in the business and for your personal needs so some cash and some borrowing may work for you
Regards
Scott
Its a good idea to get a franchise loan if you have a strong franchise model. Banks are generlly very generous when you buying a franchise if you need money in future it will be classified as capital raising.. moreover your previous franchise owner would have strong balance sheet for the last two years as they want to off load the business at a high point, Banks will look favourably on those numbers 😊
Depends how much cash you'll need for working capital. You should not borrow heavily for working Captial. As a former franchisee of 9 years and I work in the franchise industry now managing over 50 franchise systems, trust me, working capital is critical. Your most important investments will be quality staff and local area marketing. Franchise lending is cheap from banks these days so not as big a concern. Link with me on LinkedIn and check out my blogs about franchising might help you,
Hi Jon,
Do you have an accountant or a tax agent? They are the best expert on the question you are asking. It is a Cost/Benefit analysis issue. The cost of the money borrowed has to be balanced by the tax offsets you can make. Find a good accountant especially one recommended by a franchisee in the same industry. Regards, Bulelwa Freer.
Hi Jon,
You would be getting a loan to assist with cashflow. Starting a new business is always difficult and there is always teething problems in the beginning.
You could get a loan initially, to see how things go with the business and then use the cash to pay the loan off if things are running smoothly.
Please make sure you do get accounting and legal advice before taking any further steps.
Kind regards,
Jenny Thai
JTR & Associates
02 91443180
www.jtrandassoc.com.au
It is my experience there are less lenders offering unsecured lending for franchises - most want 50% of real estate and either good current financials or strong franchise model for greenfield (new) business. Accounting practices, financial planners, dentists and others still make the easy funding list. Happy to help