Financing a Franchise
To understand franchise financing, let’s begin with what the franchisor is looking for. All franchises require that all applicants meet certain financial criteria to ensure that they have sufficient capital to start a new business. Franchisors require minimums for both net worth and available liquid capital. The majority of franchisees will consider financing a portion of their new enterprise in contemplation of optimizing positive cash flow.
The Zoom Room requires that all applicants for a single unit have a minimum of $500,000 in net worth. Additionally, applicants must have a minimum of $200,000 in available liquid capital. (For multi-unit developers seeking to open three or more units, these minimums would be higher.)
The typical all-in cost to open a single Zoom Room is approximately $300,000. This includes franchise fee, three months’ rent, build out, security deposit, travel costs, equipment and inventory, insurance, and all other costs. You can view more details about our franchise costs here.
But while a Zoom Room franchise will require an investment of about $300K, our available capital requirement is $200K. That’s because our expectation is that the majority of applicants will seek some type of financing. The most common types of financing are SBA loans, 401K rollovers, and private financing. Private financing of a franchise involves loans from friends, family and business partners.
(An initial investment of $300,000 is much lower than most dog franchises. Learn more about the relative costs in our franchise comparison chart.)
Available Liquid Capital
Available liquid capital refers to just that — funds you have readily available in bank accounts, stocks and the like. The value of your home, for example, does not count toward your available liquid capital. Having an excellent credit score is a fantastic attribute, but the amount of credit extended to you does not count toward liquid capital.
Some applicants occasionally ask why, if the intent is to finance, we would require that they possess a specified minimum of liquid capital. The easiest way to explain this is by way of analogy to buying a home; before any bank would extend a mortgage to you, they’d first need to see that you can provide a sufficient down payment on the property — no bank will finance the entire cost of the home, and the same applies to funding a business, be it a franchise or otherwise.
Unlike available liquid capital, net worth is all encompassing. When calculating your net worth you would include the value of your home and any other real estate as well as funds in retirement or other funds not readily accessible to you.
Your net worth is calculated by simply adding together all of your assets and subtracting from them all of your liabilities.
Assistance with Financing a Franchise
We have partnered with industry leader Benetrends to provide fast and easy franchise financing assistance to Zoom Room applicants. Initially, they can assist you by establishing that you are indeed well qualified to become a franchisee. And if we award you a Zoom Room franchise, they can streamline the process for obtaining an SBA loan or 401K rollover.
A loan from the SBA (Small Business Administration) is the most common type of franchise financing. Many of your local banks participate in this program. Be sure to check with your preferred bank. And check with the franchisor to see if they are on the SBA’s Approved Franchise list. (The Zoom Room is proud to be on this list!)
In order to be on this list, the SBA must familiarize itself with the terms of the franchisor’s franchise agreement, and scrutinize it for any terms that might be unfair toward the franchisee.
If you have a 401K plan, a 401K Rollover is one of the most popular options for franchise financing, as it allows you to access your funds without incurring penalties. The process can be a bit tricky and technical, so check with the franchisor to make sure they or their partner are able to assist you with this. (The Zoom Room, through our third party financing arm, is indeed able to provide you this assistance.)
Franchise Financing Calculator
To determine your eligibility, please use this calculator below, provided by Benetrends. Benetrends is one of the trusted third party franchise financing experts employed by the Zoom Room and many other franchises. They specialize in finding franchisees the best financing options. They can assist you with preparing all of your documents, including both financial records and your business plan.
Once you enter your information in the form below, you will instantly see your results appear on the screen below. It will show you which types of financing you’re likely to qualify for, and what amount of funding you may receive.