Is there a No Money Down Franchise

Can you buy a franchise without having to put any money down?

What are the possibilities that a person with little or no money can finance and purchase a franchise business? In the majority of cases, it is the lack of initial capital, not only to buy the franchise, but also to run it that is the deal breaker. Many franchises will look to have a franchisee have, “skin in the game”, meaning that they have a vested interest in the success or failure of the business and will tend to put in the extra effort when necessary. If it is too easy to walk away with nothing to lose, a franchisee may do just that. Initial fees and other start-up costs can range from $10,000 to over $1 million depending on the type of business you want to start. Fortunately, there are a number of available resources that you might consider to use when you seek to raise the required down payment.

Borrowing from Friends and Relatives
You may know over 100 people that would love to invest in your business if they could have an equity position in the enterprise. Your franchise attorney can put together a corporation where you could offer limited partnerships to friends and relatives to finance the down payment to the franchisor.

Taking a Withdrawal from your Qualified Pension Plan
Many people work 20 or 30 years or more saving in a retirement plan only to wind up without enough money to retire comfortably. One way to leverage your retirement money and start that business you’ve always dreamed of, is to use your retirement account to fund your franchise down payment.

Borrow Against your House
If you have lived in your home for a significant amount of time, you might consider borrowing against the equity in your home. Some banks will loan up to 85% of the equity you have in your home and you can use this money for your franchise purchase.

Tax Consequences
No matter what source you use to finance the down payment for your franchise, you should consult a franchise attorney and a certified public accountant first to confirm the income tax consequences of the decision. While this is not to be considered tax advice, most distributions from a qualified pension plan that is taxable and in addition, if you are under a certain age, it could trigger an early withdrawal penalty.

No matter what method, or combination of methods, you use to finance the purchase of your franchise, you need to first hire a franchise attorney to advise you how to do it correctly and stay within the law. Call the franchise attorneys at the Law Firm of Marion L. Herman today.