Like when you started house shopping, it’s a good idea to know what you can comfortably afford when you search for franchises.

It is wise to be aware of your assets’ current values, and your outstanding credit and loan balances since franchises have minimum financial qualifications based on a person’s liquidity and net worth.

What is the minimum amount of liquidity and net worth to qualify for a franchise?

To answer this question, I recommend separating franchises into two very broad categories:

1. Brick and mortar or location-based businesses

2. Service businesses

You are correct in thinking that a location-based franchise will cost more than a service franchise. Examples of brick-and-mortar franchises include restaurants, hotels, and gas stations. These can be very expensive, requiring $300,000 - $600,000+ liquid at the lower end and a net worth in the range of $1 Million - $5 Million+.

However, there is an abundance of less expensive brick-and-mortar franchises that frequently operate out of smaller, leased spaces in strip or shopping centers like gyms, hair salons, and learning centers.

Minimum financial qualifications can be in the neighborhood of $125K - $150K liquid with a net worth of $300K - $500K.

For the second broad category of franchises, we have service-oriented businesses without storefronts. Think in-home senior care, residential or commercial cleaning, maintenance or repair services, and business coaching. These can be home-based businesses or operate out of modest outside offices.

Minimum financial requirements can be in the range of $80K - $100K Liquid with a Net Worth of $200K - $450K.

When it comes to liquidity requirements, whether for a brick-and-mortar or a service franchise, most people don’t have that kind of cash in a bank account. There are other non-financed sources of money which include investment, money market, and savings accounts. And don’t forget about your retirement accounts.

The biggest surprise many people have is learning that they can use retirement fund monies without tax or penalty for a business, including a franchise.

How can you finance the purchase of a franchise?

There are excellent financing companies that specialize in franchises. They offer services beyond just SBA or commercial loans. They are also experts at the use of retirement monies to fund a business. To get prequalified for a loan or to learn more about using retirement funds, visit this webpage.

I hope you found this general information helpful. To have a confidential chat about your financial situation, call me on my direct line at (706) 736-0579 or email me at anna@selectfranchises.com. I am glad to provide you additional information and clarity.