How to Get Financing for a Franchise

You have done your due diligence, read several pages of literature, and looked into the statistics on successful franchises. Before signing the dotted line and diving into becoming a franchise owner, it is essential to consider how you will raise the working capital.  You may review these franchise financing options.

Franchisor Financing

If the prospective franchisor offers to fund you, it is worth considering. Some franchisors post details of the funding on their websites. You may also learn the information from the Franchise Disclosure Document (FDD), which the franchisor will give you at least 14 days before you buy the franchise. Franchisor funding is a good source of financing because its terms are usually favorable.

Bank Loan

A credit union or bank can finance a franchise. The bank may want to look into your credit rating, business credit rating, and other supporting documentation. Traditional banks are often conservative, which means the franchise you wish to invest ought to have a strong track record. Some banks might require the owner to give collateral or put up 20 percent of the upfront funds.

Crowdfunding Options

You can get creative in pursuit of franchise financing by going the crowdfunding way. If you are not comfortable setting up the page, you may ask for assistance from organizations that do it. You may also lookup websites that crowdfund for specific businesses and lend the funds to people that require the capital.

Credit Card

Small business credit cards usually have higher credit limits than personal cards. Therefore, you can finance a low-cost franchise by transferring the funds to your business bank account. The option has a risk of paying high interest, especially after the low introductory rate expires. Since yours is a startup, the chances of it picking up immediately are slim. However, you may use it to pay your day-to-day expenses rather than the significant purchases.

Friends and Family

Believe it or not, a popular way of raising franchise financing is by borrowing from your family and friends. Whether you choose to ask for money out rightly or making the friend or family member a partner, these loans have suitable terms. The downside is that they might cost disagreements and, at times, loss of friendships. That is why you ought to write a contract that states the repayment terms.

Becoming a franchise owner is an excellent opportunity to get started on the entrepreneurship journey. You have the support of a big corporation and the safety of an established brand. Before approaching a lender, begin by evaluating your business plan thoroughly.