Financing A Franchise: What To Know
Franchise ownership is an excellent business to start. Having both the flexibility of a small business and the support of a large organization is great when you’re starting as an entrepreneur. If you have retired as a director or been laid off, you can be your own boss by getting into the franchise business.
However, the biggest obstacle in owning a franchise is the franchise cost. Most people cannot finance a franchise, and they don’t know how to raise the required capital. This blog post will share different ways of financing a franchise to kickstart your entrepreneurial journey.
Different Ways of Financing a Franchise
The first thing you do before approaching is a lender is determining your net worth. That way, you will know how much loan you can ask for. The best way to assess your net worth is by accumulating your assets and dividing them by total liabilities. Once you know what you are worth, you can avoid being lowballed financial institutions.
- Go to Your Franchisor
If you need capital to purchase a franchise, your first option should be your prospective franchisor. Many franchisors have tailored financing plans for their franchisees. This is one of the most common ways to finance a franchise, and franchisors also offer loans to buy startup equipment. The best thing about taking financial support from your prospective franchisor is that they become a one-stop solution for everything.
2. Commercial Bank Loans
Another common way of financing is through commercial loans. A term loan is what comes to mind when people think about financing. In this model, a bank or a lending institution provides a lump-sum amount that can be used for funding. The payment model is broken down into monthly installments, and a large amount is to be returned in the form of interest. However, acquiring a business loan is not easy and requires multiple verifications of credit trustworthiness.
3. SBA Loans
One of the most sought after option for financing a franchise are SBA loans. The US Small Business Administration partially backs these. These loans follow a similar structure as a commercial loan. However, since the government funds them, lenders are comfortable providing more money for less interest and longer repayment terms. This is the most accessible form of acquiring a loan and most convenient as well because as your franchise grows and starts making profits, it is easier to pay back your amount plus the interest amount.
Franchise Frank Can Help Score Your Dream Franchise
Finding finances for a franchise is one thing, but you need to select a franchise at the same time. Franchise Frank can help you look for the correct franchise for you, as well as help you find the proper funding for that franchise, at the same time in a parallel fashion. Frank works with several financial partners to help his clients find SBA funding or 401K business rollovers to help fund your franchise.
Picking the correct franchise out of the 4,000 that is now available is a challenging task. Let Franchise Frank help with your search. Frank represents 150 franchises in 20 different industries. His service is free to you; he gets paid by the franchisors.
