It can be very difficult to find financing for any small business, and this is no different with finding funding for a franchise. While there are some opportunities that are available to all businesses, both large and small, franchised or not, there are also some avenues that are available only to franchise owners. Here are some of the different franchise funding options to look into as a new franchisee.
The Franchisor Itself
It may be possible to work with the franchisor itself for help getting your loan. They might also be willing to waive fees or connect you with lenders who are more likely to help you with a small business loan. Every franchise has a Franchise Disclosure Document and those companies that offer funding will indicate so on this document. Don’t make the mistake of thinking that this is your only option or even your best option in many cases. Make sure you review the terms that the franchisor is offering and look into alternative options to see where you can get the best terms and rates.
Franchise Financing Company
There are a number of franchise financing companies. These companies actually specialize in funding franchises. They work on your behalf to match you with compatible lenders, and in some cases will actually lend to you themselves. Many extremely successful franchises all over the world have had positive experiences with franchise funding companies. BoeFly is one that has assisted several large name brands get financing.
Traditional Lending Options
Of course it is may be an option to go through your bank or credit union for franchise funding needs. Some of the benefits of traditional loans include the fact that you might already have an existing relationship with the institution. They can clearly see through your account history that you have made on time payments and have been a steady, reliable customer for a long period of time. The U.S. Small Business Administration has also done research that states that franchise owners are 15% more likely to obtain a loan through traditional lending options than owners of other business types.
SBA-Backed Loan Options
The U.S. Small Business Administration offers many loan products through traditional lending institutions and other lenders. A franchise can be a great way to start a business where the business model and plan is already in place, but getting funding for it is extremely important. If you are considering franchise funding and feel you have exhausted all of your options, ask a lender you know and trust whether they offer loan products that are backed by the SBA.