Australian Franchises

The Million Dollar Question - Should I Borrow More Money to Invest in a More Expensive Franchise?

Written on the 24 April 2012 by Mark Fernandez, Director, Business Development Alliance

The Million Dollar Question - Should I Borrow More Money to Invest in a More Expensive Franchise?

One of the many questions that I am asked is whether or not someone should borrow more money and buy into a more expensive franchise system or just to buy a franchise with their existing cash reserves? This is the million dollar question! It really comes down to a few key areas and it may not always be that the more money you invest the higher the returns.

  • Can you really afford this business? Are you stretching yourself too far?
  • What assets will need to be used as security by the bank or finance company to receive funding?
  • What’s the impact on my overall situation if the business folds – how will the debt be repaid?
  • Have I borrowed enough money to ensure that I do not require any more capital in the short term?
  • Does the business fit you? It has to suit your skills, your family and your lifestyle in the long term.
  • Are your projections realistic?  How have they been arrived at?  Do they take account of all the financing costs?  These can be considerable.
  • Is the projected income enough for you to live on and provide profit for growth?  Also, to pay for any borrowing?  i.e. Interest and capital repayments?
  • What is the best use of my money as I know that I can achieve a 5-7% return by not doing anything and leaving my cash in a term deposit.
  • What structures do I need to put in place to run a more sophisticated franchise? Generally the more investment required the more structures, staff, obligations and demands on time and energy are required.    

 

In essence you are the only one that can make your own decision on how much capital is required to invest into your next business. Whether you are investing 100% of your own funds or you borrow more money to purchase a business you need to seek the right advice from your accountant, lawyer and business advisor prior to signing on the dotted line.

Mark Fernandez
Director
Business Development Alliance
www.bda-online.com.au
 


Author:Mark Fernandez, Director, Business Development Alliance

Latest Franchise News

Australian Franchises Article Image

FAMILY DRIVES COFFEE CONVENIENCE IN BRISBANE

Ralph Fioretti is a man on a mission; to bring Zarraffa’s-style drive thru coffee to Brisbane for the first time. ...Read more

Australian Franchises Article Image

KING IS THE NEW QUEEN

    More  Australians  are  buying  king  size  beds  than  at&nbs...Read more

Australian Franchises Article Image

Twice the Coffee for Major Gold Coast Arterial Road

In what may be considered a surprise move, franchisees Jimmy and Bernadette Williams will open the doors today to another Za...Read more

View more Franchise News

Expert Advice

Australian Franchises Article Image

What is the formula for franchise growth


In order to penetrate a market, rapid franchise unit growth is important. However few franchises appreciate the impact of...Read more

Australian Franchises Article Image

Six 'Cs' for international franchise expansion

With many franchises looking to expand their franchises internationally we thought it was time to revisit Asiawide Franchise...Read more

Australian Franchises Article Image

Event Apps and Exhibitor Portal Launched.

Event technology company, iVvy, is adding more valuable, inclusive features to its eventmanagement system; increasing productiv...Read more

View more Expert Advice
EmailRSSLinked InTwitterFacebookRSSLinked InTwitterFacebook