FUNDING OPTIONS

How Do You Finance Your Franchise Purchase?

My clients regularly ask me about what their options are when it comes to financing their franchise. Here’s a list of some of the options for financing your new franchise.

FUNDING OPTIONS

How Do You Finance Your Franchise Purchase?

My clients regularly ask me about what their options are when it comes to financing their franchise. Here’s a list of some of the options for financing your new franchise.

In-House Financing

One of the most common financing options for franchisees is by going directly to the franchises themselves. Many franchises offer financing opportunities at some level that can help to seriously alleviate some of the financial burden of opening a franchise. The actual amount of financing available from a franchise varies greatly from franchise to franchise. What exactly they’re willing to help with also varies greatly.

Some franchises will defer part of the franchise fee, offer temporarily reduced royalties, or help cover the costs of necessary equipment. While the interest rates on these forms of financing can be higher than traditional bank loans they’re also sometimes available without collateral requirements. The terms and conditions of these financing options vary so make sure you check with your franchise.

Small Business Administration (SBA)

There are also options out there to help you out if you need to use commercial bank loans. The US SBA can provide SBA loans to franchisees to help them out. SBA loans are an interesting situation because they aren’t direct loans to franchisees normally. Instead these loans act as guarantees to the banks making it easier for franchisees to acquire traditional small business loans. These can be especially useful for franchisees that are looking to open smaller or lesser-known franchises that banks may be wary of taking on.

Commercial Bank Loans

Commercial bank loans are another common option, as if you were financing any other major purchase. Like financing from franchisors, the financing available from commercial banks can vary greatly based on the exact situation you are in. Oftentimes the franchise you are opening can play a big role in your ability to secure financing from a commercial bank. If you’re looking to open a franchise with a more proven track record then the bank may be more likely to provide you with a loan, as they view it as a less risky move. The downside to this is that if you’re looking to open a smaller franchise you may be required to provide additional collateral to secure the loan.

Retirement Account

Last, but certainly not least, a very popular funding strategy that is widely unknown is the legal use of your retirement account. However, this option has a greater level of complexity and should be handled by experts in the financial service industry. They can provide a tax-free and penalty free option for investing your own money into your own company. Over the past five or six years, retirement funds have become one of the most popular ways of funding small businesses in America.

In House Financing

One of the most common financing options for franchisees is by going directly to the franchises themselves. Many franchises offer financing opportunities at some level that can help to seriously alleviate some of the financial burden of opening a franchise. The actual amount of financing available from a franchise varies greatly from franchise to franchise. What exactly they’re willing to help with also varies greatly.

Some franchises will defer part of the franchise fee, offer temporarily reduced royalties, or help cover the costs of necessary equipment. While the interest rates on these forms of financing can be higher than traditional bank loans they’re also sometimes available without collateral requirements. The terms and conditions of these financing options vary so make sure you check with your franchise.

Commercial Bank Loans

Commercial bank loans are another common option, as if you were financing any other major purchase. Like financing from franchisors, the financing available from commercial banks can vary greatly based on the exact situation you are in. Oftentimes the franchise you are opening can play a big role in your ability to secure financing from a commercial bank. If you’re looking to open a franchise with a more proven track record then the bank may be more likely to provide you with a loan, as they view it as a less risky move. The downside to this is that if you’re looking to open a smaller franchise you may be required to provide additional collateral to secure the loan.

Small Business Administration (SBA)

There are also options out there to help you out if you need to use commercial bank loans. The US Small Business Administration can provide SBA loans to franchisees to help them out. SBA loans are an interesting situation because they aren’t direct loans to franchisees normally. Instead these loans act as guarantees to the banks making it easier for franchisees to acquire traditional small business loans. These can be especially useful for franchisees that are looking to open smaller or lesser-known franchises that banks may be wary of taking on.

Retirement Account

Last, but certainly not least, a very popular funding strategy that is widely unknown is the legal use of your retirement account. However, this option has a greater level of complexity and should be handled by experts in the financial service industry. They can provide a tax-free and penalty free option for investing your own money into your own company. Over the past five or six years, retirement funds have become one of the most popular ways of funding small businesses in America.

Awards & Recognition

DOWNLOAD NEW eBOOK

“Profits are Better Than Wages”

By Seth Lederman--award-winning franchise consultant and published author 

104-pages filled with valuable information you need to know in advance of selecting your best franchise.

GET IN TOUCH


SCHEDULE CALL