For many first-time business owners, the task of securing funding for your investment can be daunting. There’s a lot to think about – dollar amounts, interest rates, retirement fund rollovers. The process requires research, decision-making and time.
At Honey Baked Ham, we know that funding your franchise investment is a big step in an even bigger decision – and we’re here to help.
A Little Help From Our Friends
We refer all franchise candidates to one of our Preferred Lenders like FranFund, a national small business funding “concierge” service, and United Community Bank, a national, franchise-exclusive lender based in North Carolina. The Preferred Lenders work with the candidate through the process of discovering how best to finance their venture. Because all of our Preferred Lenders understand the HoneyBaked brand and are well-versed in the franchise industry in general, they’re often able to secure financing when a local bank branch cannot.
Lots of Options
We spoke to FranFund’s National Director of Franchisor Relations, Abby Nicholl, and Franchisor Relations Manager, Jessica Roques, and United Community Bank’s Vice President of Franchise Lending, Patrick Mizzell, to get insider details on the funding options available to Honey Baked Ham franchisees.
There’s no one-size-fits-all solution to small business funding. Between the two franchise-focused financial organizations, these are the five most common funding options franchise candidates can access.
Small Business Association, or SBA Loan
Despite what the name suggests, the SBA doesn’t actually directly disperse loans. When entrepreneurs apply for a loan through the SBA, the SBA approves loan applications they receive from authorized lenders like banks.
The IRA or 401K rollover – which FranFund calls The FranPlan™ – is a popular choice because it allows potential franchisees access to their own capital without taking on debt. It’s also a tax- and penalty-free funding solution.
Slightly riskier than an SBA loan, a conventional loan gives franchisees access to capital based on the potential viability of their business. A nationally-recognized brand like Honey Baked Ham, for example, is considered more likely to succeed than a startup, so, borrowers intending to franchise with an established name are usually more likely to receive this type of loan.
Franchisees can also apply for a low-interest line of credit backed by their own non-retirement, qualified securities like stocks, bonds, U.S. Treasuries and mutual funds. This allows future business owners to leverage the value of their investment portfolio without having to liquidate their assets.
These involve revolving lines of credit that work almost like multiple credit cards. Lenders take borrowers’ credit score into account, rather than their assets, to determine their eligibility.
Wisdom From the Experts
Since the world of business funding is vast and complex, the experts agree that the best advice they can give is for those seeking funding to start the journey early.
“Finding funding can become a bigger concern when candidates wait too long to start having financing conversations. They fall in love with the brand and get pretty far down the road to ownership and then funding can become a cause for anxiety. It’s much better to find out early what you can handle financially before you get that far.
– Abby Nicholl, National Director of Franchisor Relations, FranFund
“Be patient and start early. It would not hurt me to have a conversation today, even knowing the loan might not close even a year from now. That way, I can give them a preliminary review and step-by-step layout of what this project will look like. You don’t want it to be a rush.
– Patrick Mizzell, Vice President – Franchise Lending, United Community Bank
So, if you’re considering becoming a Honey Baked Ham franchisee, let us know! We’ll tell you everything there is to know about our concept and our franchise opportunity and get you in touch with the financial experts you’ll need to get started on your way to becoming a business owner.