It’s no surprise that franchising financing requires a wealth of capital; after all, it is one of the more robust forms of real estate investing. However, the amount is usually worth it: you not only reduce risk, but you also get to take advantage of the powers of a well-established brand name. There are several financing options available – we will explore them shortly below.
The Traditional Bank Loan
This refers to the term loan and consists of obtaining a lump sum from a bank or other lender. If you can qualify for this – as it is dependent on creditworthiness – then you simply pay back the loan via monthly payments that cover the interest and the portions of the principal over some time.
The Direct Method: Franchisor Financing
This is probably the most direct option: in most cases, the very franchisor (you are the franchisee) can provide you with the funding necessary to get off the ground. This option tends to offer everything type of loan you’d need – from property to equipment. Experience and a business plan help greatly in securing this type of franchise financing.
Small Business Administration (SBA – Federal Government) Loan
This SBA does not itself give loans; rather, they have an approved list of lenders that accept them (the federal government) as a guarantor. Since the US government would be the very last entity to go bankrupt, this gives you the best possible interest rates for franchise funding (or any real estate funding, for that matter).
Lending Alternatives for Franchise Funding
This entails quite a few options, so we’ll group them by what they offer: you can get funds for equipment financing, term loans, and business lines of credit from these non-traditional lenders. The amount of money you can secure is usually less when you opt for alternative lenders.
Personal Contacts – Family and Friends
This type of franchise funding is self-explanatory and can have huge advantages over the others (lack of interest payments, for starters). It can extend to acquaintances, too – but usually, they’ll want to be part of the franchise business with you.
This option has taken off within the past decade or so, with sites such as Kickstarter and Indiegogo bringing crowdfunding to the masses. It’s worth it to try for franchise funding – especially if you can come up with an engaging campaign.
Contact Means Commercial Capital to finance your business needs.