How to Find the Right Franchise Financing Opportunity
Buying a franchise can be a beginner’s step for business ownership and wealth generation. While this avenue still requires patience and hard work, there is often a stronger support system when compared to starting your own company or acquiring a stand-alone business. Franchise financing can offer you more buying power to get a franchise with a more recognizable brand. Here is a look at how to find the right financing for your franchise dreams.
Franchise-Specific Lenders
A good place to start is with lenders who cater to franchise owners. These lenders might have lower requirements than your typical bank because they realize franchises are not as risky as standalone startups. If your franchise is well known, such as McDonald’s or Subway, then so long as you can show there is a need in the area you want to build, you could get approved quickly.
Small Business Lenders
Lenders backed by the Small Business Administration consider franchises under their umbrella. The term “backed by” takes care of the fact that the SBA does not give out loans but instead provides a guarantee of up to 90% to banks and lenders who give approved 7a loans. It is important to follow all of the SBA’s guidelines for franchise financing when applying for SBA financing. Ignoring these guidelines can lead to your loan being turned down even after meeting all the financial qualifications.
Alternative Lenders
Financing is all over the place for a savvy entrepreneur. Perhaps you have trouble securing financing for the franchise itself but can get some of your equipment costs covered with equipment financing and leasing. There are also grants for certain classes of entrepreneurs, such as women and minorities. Even if you do not fall into either of those two categories, grants can be found with a variety of options and there may be one that works for you. Finally, crowdfunding online or from friends and family is another option to get a franchise off the ground.
Owning a franchise can be a rewarding way to own your own business without all the risks of a startup. It can also be a good way to get your feet wet and later start your own company. Franchise financing takes even more of the risk out of buying a franchise since you are not putting up your own money. Multiple avenues of financing exist for franchise buyers, it all comes down to doing your homework and seeking out every option possible.
