Perhaps, one of the greatest advantages of buying a franchise business is that generally the franchisors have setup arrangements with banks and leasing companies to help the new franchisee with financing. Currently, with a financial sector in a state of disruption from the subprime lending crisis small business loans are much harder to get these days.
Even companies with longstanding relationships with their local banks are finding that their lines of credit are being reduced due to the fact that their profits are down 20 to 30% from the previous year. This in itself is a huge dilemma for small businesses that are trying to stay afloat and not go out of business during the lean economic times and downward spiral in the business cycle.
Of course, a franchise business also has to deal with this same problem however franchised businesses have greater access to capital than normal small business startups. Many Americans that may have been laid off due to the harsh economic times are looking to own a business of their own rather than working for a large corporation and simply becoming a laid off once again. This is why franchises do so well in lean economic times, that along with the fact that they often have financing available. Franchisors know there will be more franchise buyers willing to invest if they maintain strong banking relationships and assist in locating good financing options.
Indeed, a franchisee cannot buy a franchised outlet from a franchisor unless they have proper financing and the franchisor will do whatever it takes to ensure that the potential team members and new franchisees coming into the system have adequate capitalization to start their new franchise. If a franchisee is creditworthy, they may find themselves in a very good place when it comes to financing their new business. A small business owner starting from scratch will not have such advantages in the market place during turbulent times.