A franchise can be a wonderful opportunity to start a business while still having support and guidance from an organization to help you achieve success. However, just like starting a business on your own, opening a franchise requires financing to get started. Fortunately, there are options for financing that can help you open the franchise you are dreaming of.
Traditional Bank Financing
When people need financing for a franchise, a traditional loan from a bank is probably the most popular solution. However, because new businesses (even franchises) can be risky, banks often have strict requirements for applications. They also typically require collateral for the loan as well as a down payment in the amount of approximately 20% of the money needed. In addition, traditional banks may evaluate your application based on the brand of your franchise, to help ensure stability, along with your financial records.
The Small Business Administration (SBA) can be a useful option for franchise financing. The SBA has loans set up for small businesses, including franchises, so they may be more accommodating to your circumstances and financial standing. In addition, SBA financing may have loan terms that are more flexible for a franchise owner, making repayment more practical, especially when the franchise is in its early days of operations. However, it is important to remember that SBA loans may have different types of terms, such as fluctuating interest rates, and many loan programs have a borrowing cap regardless of the amount of money you need.
Other Franchise Financing Options
There are organizations, including the SBA, that have specialized financing options for certain groups of people who want to start a franchise. For example, the Patriot Express program partners with the Department of Veterans Affairs to encourage military veterans to seek entrepreneurship and franchise operations after leaving military service. These types of programs may have more attractive terms for those who qualify.
You do not have to let financing keep you from opening a franchise. By finding the right financing option, you can get the money you need and be on your way to achieving your financial dreams.