6 Tips for Financing a Franchise
Franchise offer a proven business model, excellent support and a brand reputation that can help you get off to a solid start. Many franchises provide assistance with planning and construction, but not all offer financing. How can you get the capital you need for equipment down payments, real estate and other needs?
1. Do Some Research About Your Franchise
The first step is to find out specifically what the franchise offers in terms of financing and financial assistance. This information is often located in the Franchise Disclosure Document provided to interested franchisees. Ask whether financing is provided by the franchisor or a third-party lender, and how much is offered. At the very least, you may be able to pay the initial franchise fee in installments rather than a lump sum.
2. Detail Your Qualifications
Look at loan applications the same way as sales pitches to investors. You need to answer the question “Why would this lender or angel investor want to invest in me?” What makes you an excellent entrepreneur? What unique qualities, experience or insight do you bring to the table? If you’re passionate, it may tell lenders that you’re a great investment.
3. Learn About Government Programs for Small Businesses
The U.S. government wants to drive commerce by helping people open a business. There are numerous programs designed to assist with financing options. Some franchises are on the Small Business Administration’s Franchise Directory, meaning you can qualify for low-interest SBA loans with those franchises.
4. Get Expert Advice
Lenders who have experience working with franchises can provide helpful insight. They may have recommendations for financing options that work with your current savings. By building a long-term relationship with this kind of professional, it’s easier to get financing for business needs in the future as well.
5. Check Into VetFran
If you’re an armed services veteran, it can be easier for you to open a franchise location. VetFran is an International Franchise Association program aimed at helping veterans qualify for franchise financing. Benefits include sizable discounts on initial franchise fees and help obtaining financing.
6. Look for Alternative Sources of Franchise Funding
If you’re having trouble qualifying for financing (maybe because you’re a brand new entrepreneur) or coming up with the liquid capital requirements for your favorite franchise, it may be time to broaden your horizons. Talk with friends and family members to see if they’re willing to invest with you. People may be willing to lend you needed capital with low or no interest.
Franchises aren’t a crazy dream — they’re a proven financial model with significant support. A franchise can be a great way to launch the company of your dreams.