Making The Franchise Purchase
My question is about franchise financing, liquidity and net worth. If I have the liquid cash to start with, but not the net worth, what do I do?
Financing And Available Cash
Good question and one that is often confusing. Most franchisors state their requirements for liquid assets (or cash required) plus total net worth. They’re simple parameters for quick qualifying on both sides. Franchisors sort out a prospect’s financial qualifications very quickly. So should buyers.
As you most likely understand, one’s ability to obtain financing is generally a function of net worth and credit worthiness. Net worth, of course, is the total of all assets minus debt. Franchisors will consider your cash (or total liquid assets) as important to cover the costs of franchise fees, initial payments, training expenses, working capital and living expenses. Your net worth represents the borrowing power to cover the purchase balance. That would be equipment, leases, build-outs and so on.
First Decide What You Want To Do
Deciding first on a direction will save so much time and energy. And it certainly will keep you from falling prey to a slick sales pitch that brings you into a business you’ll regret. If you’re searching for direction consider The Focus Program for Emerging Entrepreneurs.