There is an answer to the funding problem, however. Elgin writes that more and more people are funding their businesses using the money in their qualified retirement accounts. This is a source of investment capital most people haven't even thought of, and it allows franchise owners to fund their business without debt or interest. By investing in themselves, Elgin says, these franchisees retain control over how successful their investment becomes.
The money can be accessed without taxes or penalties for early withdrawal, but Elgin warns that the rules must be followed. The simple way to access the money, he says, is to borrow it. A more complicated method involves a transaction often called a Rollovers as Business Startups, or ROBS, plan.
There are pros and cons to financing a franchise this way, but Elgin says that the biggest advantage is having the investment decisions belong to the business owner and only the business owner.
Franchise owners who want to take the more traditional route may have help as well. Earlier this month, Bancorp Bank and Franchise America Finance announced a strategic alliance. The organizations aimed to create a lending program for startup and expanding franchise businesses.
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