Before Investing in a Franchise
Investigate the company thoroughly. There are dozens of questions to be asked. It's best to
consult a specialist before investing your money. A few dollars well spent before signing
may save thousands of dollars in costs and grief later. If everything looks good, but you
lack enough cash for the down payment, there may be hope in the form of the federal
government's Small Business Investment Company (SBIC) program. SBIC provides
franchisors with millions in loans at rates far below prime.
SBICs are licensed by the Small Business Administration, and franchisees can receive up to
$3 in government funds for each dollar in private capital invested. The interest rate can
typically be 2 percent to 2.5 percent below prime. SBICs owned by franchisors can usually
lend the funds to franchisees for 2 percent to 4 percent over their cost.
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