Franchise Business and Financing Options for Entrepreneurs
The Franchise
Many times it is the right time to engage in that which is related to our studies, but nevertheless, if it is maybe to take some kind of business that is completely foreign to us. Today it is not a problem to undertake in areas remote from our experience or academic training through the franchise, a form of trade associated with each day wins adherents. In this business relationship, a parent company (franchisor) grants to small independent dealers (franchisees) the right to operate a business idea according to the criteria of the franchisor in exchange for a fee. This right includes the trade name, brand products, and the know-how. Usually borne by the franchisee to run the local and local advertising.
Sources of Funding
Funding sources are liquid resources or means of payment available to the company to meet its cash needs. One can distinguish between own and other financing (payable by third parties such as banks, savings banks).
Sources of Financing Themselves
Have no predetermined period for repayment as it pertains to the owner of the company. It is possible to distinguish between the contributions of capital and self-financing (resources generated by the activity of the company).
Flow the firm generates resources through the development of economic activity. The book income consists of income and expenditure account to finance what is the demonstrations or the money that depends on the collections and payments. Two items inside the car:
- Benefits of exercise, is the positive outcome of the current period.
- Reserves are retained earnings from previous years, the company’s piggy bank.
Advantages: greater freedom of action autonomy, no cost and which does not involve the payment of interest.
Disadvantages: slow to accumulate, many investment opportunities are lost by not having the necessary resources, temporal discontinuity is difficult to match the investment opportunity with the necessary resources, detrimental to shareholders, the benefits excesivaretencion is contrary to the spirit of society.
Sources of Financing
Self-financing is the only means of financing of SMEs, loans and credits of any kind, either short or long term, are some of the usual sources of external financing.
Commercial credit: Is the deferral that companies attach to their customers in a purchase and sale of goods or services. Not all businesses have enough power to negotiate for 90 days, not all credit providers operate.
Loan Bank: Involves the addition of interest to use it, the loan is a contract whereby the bank, the lender grants an amount of money a person or company named borrower, who pledges to return, together with the interest agreed, within a specified period of time. The repayment of the loan was in sections, called fixed depreciation fund a recurring payment. Each share has a principal payment and the interest agreed upon, divided into a predetermined schedule. The conditions are set as a function of the creditworthiness of the person who requests sometimes called a guarantee, the interest may be fixed or variable seer always depending on the Euribor, also provides the annual percentage rate (APR). The APR is a global interest rate that measures only the actual cost of the loan taking into account the fees to be paid each month and bank charges., Is the real cost of financing.
Account bank credit: A credit account is a contract whereby a bank makes available to a person or company, the ground, the amount of money needed without exceeding a limit established. The person can withdraw or deposit funds as if it were a bank account, plus interest paid by the money ready and also because of the money is not ready.
Confirming: The confirming guarantee for the provider and business providers receiving funds sometimes even before expiration date. The confirming is a service by which financial institutions provide their customers with the administration of payments.
Discount Bank: Before maturity, debt securities may be transferred documented in a financial institution, which anticipated the amount into account by deducting certain amounts in fees and interest. The rate or interest rate the bank charges to anticipate the amount of documented debt securities or bills of exchange before maturity is called bank discount, the whole operation.
Factoring: An operation on the default risk is not supported by the vendor, but by a firm specializing in this type of transactions. Called factoring in the sale of rights to payment in exchange for interest and fees. The cost of factoring is higher because society factor has to bear the cost of deferral, the risk of impact and also benefits with his type of activity.
Forfaiting: Is the sale of documents for the payment of goods and services exported.
Leasing: Is a financing company in exchange for shares of lease, has the possibility of using a price below its value in the market. A leasing is a well with an option to purchase the same at the end of life of the contract.
Renting: Renting is a bilateral commercial contract where one party, the leasing company, is obliged to yield to another, the undertaking, the temporary use equipment on payment of rent. A renting contract is in practice a lease without option to buy.
Financing Life
The preferential finance focus on the financing of investment projects highly relevant stages the life of an SME, such as: the initiation, consolidation, business growth and internationalization.
Official Credit Institute (ICO): The objective is for companies to overcome the critical period of the first two years of life.
System mutual-guarantee refinancing: (SGR) is a financial institution nonprofit that support to SMEs to enable them to obtain bank financing they need. Guarantees only to members. The scope of these societies is often regional or sectorial. The refinancing companies offer adequate security coverage and the risks entered into by the mutual guarantee societies.
Equity: A financial instrument is intermediate between social capital and the loan long term because, although it is true that the company has to repay a loan, your payment is so flexible that chargeability is reduced to minimal, in practice, operates as if it were a contribution from the owners.
Local Aid
Through municipal employment services, the various city councils, county or other local entities generally promote two lines of action.
Autonomic Area Aid
In general, the autonomous communities focus their efforts on three fronts:
- Social enterprises: industrial companies and cooperatives, as well as innovative often have specific lines of support.
- Disadvantaged groups: women and youth are the main recipients of aid.
- Innovative companies: companies associated with new technologies are the major creators of wealth today.
State-Level Support
Takes four forms:
- Subsidy by the establishment as a freelancer. The amount of the subsidy can reach up to 10,000 €
- And financial grants. This subsidy reduces the interest on loans to finance investment in creation and implementation of the company up by 4 points the interest fixed by the entity granting the loan, all with a ceiling of 10,000 €
- Technical assistance grants. The amount of this grant will be up 75% of the costs of services provided by external professionals with a ceiling of € 1,000
- Subsidy for training. The objective is the partial funding of courses related to management and business administration and new information technologies and communication. The amount of this subsidy will be up to 75% of the cost of courses attended, with a ceiling of € 3,000
Requirements to access any of this aid are:
- Be unemployed before the start date of activity and registered as a jobseeker at the public employment services.
- During three years as min maintaining the business and be registered with social security, in the special regime of self-employed, in the census tax and tax on economic activities.
Europe-Wide Aid
To promote harmonious development throughout the European union.
Structural Funds
Community support is aimed at reducing economic inequalities between the most disadvantaged regions of the European union and promote equal career opportunities among different social groups.