Franchising provides the unique opportunity of entrepreneurship with minimized risk of failure because they are known brands with an already established reputation. While they offer the flexibility and independence of being a small business, they also provide the support and infrastructure of a big corporation. However, getting started in franchising can be tricky and is notoriously expensive, requiring large sums of capital.
Here are a few options to considering when looking to finance a franchise or apply for a franchise loan.
Franchisors often franchise loans that serve as a one-stop shop. Because they know the ins and outs of their business and sales, they’re able to include everything from equipment to additional training and even rental space. Some franchisors even waive the franchising fee if you financing with them directly.
Franchise Financing Company
There are several companies that specifically specialize in franchising loans. They are able to match borrowers with proper lenders as provide financing directly to the borrower/new business instead of to the parent company.
Traditional & SBA Loans
New franchise owners tend to borrow from traditional lenders more than any other new business and that’s because they have a higher success rate. With traditional loans, the lender trusts the big brand behind the franchise. SBA Loans are applied for through traditional lending avenues but are backed by the SBA for up to 80% of the loans. They have much better rates than any other form of lending but come with a lengthy process and strict guidelines.
Crowdfunding & B2B
Crowdfunding sites protect your investment and can be used to promote the opportunity in an effort to raise funds. It’s not a popular or common way to raise capital for franchising, but it has been successful. Alternative lending, or business-to-business lending, is a fast, efficient and typically easier way to gain capital from fellow entrepreneurs and business owners. B2B financing is not designed for long-term projects or capital so they come with higher interest rates than traditional lending options.
For more information on how to finance your new business, contact Navigate Firm today.