Different Ways to Fund Your Franchise Investments

Franchises are some of the most thriving businesses in the US. Most franchises were able to survive during the pandemic while a lot of independent small businesses closed their doors permanently. The proven business model and support of the franchisor make it a worthwhile and profitable investment for the franchisee reducing the risk of the business going under. The USA is undoubtedly leading the way with the best franchise opportunities. The industry caters to multiple sectors, with the highest revenue generated from quick-service restaurants followed by retail and business services.

(Source: https://www.vettedbiz.com/franchise-and-small-business-statistics/)

Nevertheless, like any business buying a franchise demands funding. In this blog, we will share some of the viable options to secure funding for your franchise investments.

 

How to Get Funds for Buying a Franchise?

Are you struggling to secure funding for buying a franchise? Don’t know where to go? Here we have some great options for you.

 

Friends and Family

It is the most common way to secure funding for business, and has been happening since the beginning. If you are not sure about self-funding, you can discuss it with friends and family members who are in a position to loan you money. This method has fewer obligations as you already know the person and can work out a deal that works for both parties.

 

Banks and Financial Institutions

Not keen on asking for handouts from friends and family? Well, the next option is to seek funding from a financial institution. Many banks and other traditional financial institutions offer loans designed for franchise businesses. For loan approval, you need to show them various documents and your plan with the franchise business. Banks usually consider factors like:

 

·         Track record of the franchise

·         Financial projections

·         Credit score of the applicant

 

Other than that, they might ask for legal details about the franchise. If you are buying a new franchise in the US, they might seek details to assess the brand value.

 

Small Business Administration Loans

Next, you can get funding from the U.S. Small Business Administration (SBA). It offers loan programs to support small businesses, including franchisees. The great thing about SBA loans is that they offer;

• Favorable terms
• Lower down payments
• Longer repayment periods
• Competitive interest rates. 

 

The loan application process can be stringent, and they might require detailed financial information about the franchise and the applicant, to assess compliance with their SBA regulations.

 

Franchisor Funding

If none of the above works out in your favor when looking for the best franchises to own, there is still hope to fulfil your franchise dreams. You have to seek franchisors that offer funding to aspiring franchisees. The typical model includes instalment payments of the initial investment or direct loans. Some franchises even defer the franchise fees. It is quite lucrative as the brand will have a vested interest in your success. Chances are you will not have a problem securing the loan.  

For more information on the American franchise industry and guidance on the best franchises to buy, subscribe to Franchising Magazine USA, the leading franchise directory in the US.