Franchise Financing

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Franchise Financing with Business Loans

Becoming a business owner can be one of the most overwhelming challenges any person can take on in life (just ask someone who’s done it!)  

For those of us who aspire to be just that but want to cut down on some of the most challenging parts of the journey, franchising is a great option. It provides an established brand name and system and typically comes with training and support from the parent company that is crucial for you as a business owner in the start-up phase.

However, though franchising has proven to be one of the top business models that new entrepreneurs are looking to get involved with, they are often unaware of all the upfront costs that are involved. 

As a franchise owner, you make a commitment to run your business exactly as others of the same franchise – providing the same goods and services. Your business operates according to a franchise manual that can mean a huge financial investment. Finding the best financing option for your new franchise can be difficult. ABC is here to help. 

Uses for Franchise Financing

  • Franchise Fees
  • New furniture, fixtures, and equipment (FF&E)
  • Property improvement program (PIP)
  • Brand mandate
  • Store remodel
  • Expansions
  • Renovations
  • Build Out
  • New product
  • New displays
  • Lease Payments

The financial needs when owning a franchise can seem endless. To effectively run your franchise business, you must keep up with all of the requirements of owning that franchise, such as those listed above and much more. Yes, owning a franchise can be costly, but it also can generate a substantial income that allows your business to grow as well as provide you with a more comfortable lifestyle.

Tips When Getting Franchise Financing

  • Just as with any other type of business financing, it is important to know what is available to your business; doing a little research is important if you are looking to get the best possible loan for your business. You can do this over the internet.
  • Visiting multiple lenders can also be beneficial to your franchise business. By doing this you are able to compare the franchise loans offered by each individual lender to help guarantee that you are getting the best possible financing option.
  • ABC will present multiple options. 
  • Depending on what your franchise financing needs are (purchase, renovations, and so on), you should shop around to make sure you are getting the best prices. When running a franchise, it is important to make every penny count.

Methods of Financing for a Franchise

SBA Loans

When applying for bank financing, it’s important that you have sufficient collateral available to secure your loan. Lenders want to see that you are able to repay what you borrow, and they typically analyze cash flow statements, balance sheets, and other financial records in order to determine how much funding they will provide. The more assets you have available for collateral, the better your chances of getting approved for SBA financing. The SBA does require assets, but ABC’s loan program does not. 

Home Equity Loan or Line of Credit

A Home Equity Loan or line of credit can be used for any purpose, making either of these options a good choice for franchisees that may not have the assets to secure an SBA Loan.

Unsecured Business Loans

The criteria used to qualify for a loan will vary from company to company, however, most lenders will require that applicants be at least 18 years old and have been in business for six months or more.

The applicant must also meet minimum personal credit score requirements. Requirements vary, but most unsecured lenders require 700+ credit scores. In order to ensure successful franchisee financing, it is important that the franchise has a strong balance sheet, so as not to limit available funding options when looking for startup capital. Unsecured loans are meant to provide cash flow relief by providing relatively small amounts of quick funding without providing any assets in return other than an IOU.

Lenders factor several things into their decision to approve a franchisee including:

  • The financial history and standing of the franchise
  • Current Income and source
  • Any personal credit history in regard to the previous borrowing

Lenders may not offer the best interest rates when compared with other unsecured business loan companies due to these requirements and elements being analyzed by lenders prior to accepting a franchise into their portfolio. Unsecured loans are used when a franchise does not qualify for bank financing due to insufficient assets or past credit history with banks.

If you are considering becoming a franchise owner and would like information on how you can qualify for up to $350,000 in franchise funding, fill out the form below or call us at +1(800) 549-2744.