Running with the right crowd may be the key to financing your franchise
I talk to a lot of prospective franchisees in my work. They come from all parts of the country and professional backgrounds, and their reasons for considering a haircare franchise business are just as varied.
But there’s one thing that is pretty universal: Whenever they ask about small-business financing, the look on their face changes. I can see their concern, maybe even anxiety. It’s completely understandable—investing in a franchise can be a big leap both professionally and financially.
The good news is that there are several options for financing the purchase of a business: personal savings, retirement funds, home equity loans (yes, they’re still around!) and small-business loans are the most traditional tracks. And almost all franchisors offer advice to franchisees about third-party financing. In fact, this is one of the great advantages of joining an established and reputable franchise business—they often have long-term relationships with willing lenders. (Great Clips is no exception: thousands of North American Great Clips locations have been financed over the last 30 years. Find out more about the Great Clips investment structure at our web site.)
I’m a pretty traditional guy when it comes to helping other people spend their money. (I think most of the prospective franchisees I talk to regularly will be glad to hear that!) But my instinct tells me that, in the near future, there will be an increasingly popular financing option for small-business owners—crowd funding.
Crowd funding has gotten a lot of attention lately because of the Jumpstart Our Business Startups Act (the JOBS Act), recently signed by President Obama. The primary purpose of the JOBS Act is to help ease the regulatory burden of raising money for startups. But the JOBS Act also includes provisions that would allow individuals to buy equity stakes in a startup company via a crowd-funding online site. Here is an excerpt from the article in USAToday that piqued my interest:
The JOBS Act will likely raise the financial bar for some crowd-funding sites when they start selling equity online next year. While equity deals on crowd-funded sites have been legal in Europe and Australia for some time, U.S. regulators have kept a lid on the notion until now because of concerns about fraud… Still, crowd-sourcing proponents are betting that the advent of another fundraising channel will be a boon to entrepreneurs whose dreams have been kept in check by finances.
Crowd funding isn’t new. Kickstarter is a well known crowd-funding site for creatives looking to finance everything from off-beat documentaries to robots. But financing more traditional businesses through crowd funding is definitely a new path and I’ll be interested to see where it leads.
Here are some related sites. Take a look around and let me know what you think.
IFA News: JOBS Act will Boost Access to Capital for Franchise Small Businesses
Sprigster: Crowdfunding For Franchising
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