What is Franchise Financing?

Prices vary greatly from company to company and franchise financing is becoming more necessary than ever. If you are not familiar with franchise financing and how it works, consider these factors in the process.

Why Franchise?

Determining whether or not a franchise is for you is the first step in the process. You need to make sure that the franchise you are looking at is a good deal. If you can see yourself making a great return on your investment over the long haul, then you should proceed without a doubt. A good franchise is very unlikely to fail. The parent company has worked out most of the kinks for you so you can go in and immediately start making money. A failing franchise reflects badly on the brand name itself. Therefore, they will do everything in their power to help you along the way. You will have competitive advantages that local businesses do not. You can get bulk discounts as if you were a national chain as well as reap many other benefits. 

In-House Financing

More and more franchises are offering in-house financing plans for prospective franchisees. While many of the smaller franchises do not offer this luxury, some of the more established franchises have the capital to spare. You will still need to have good credit and a healthy amount of liquid assets to get started. While you cannot circumvent the necessary requirements to borrow money, it will be much easier to convince the lender of the business plan. Getting outside financing will require you to present your plan to a lender. They may or may not see the potential that you do in the market. Financing a business with someone already in the business allows you to streamline the process. They know exactly what you need and will guide you accordingly. 

Small Business Loans

Going out into the marketplace, you can obtain a small business loan that is backed by the Small Business Administration. The SBA is a government agency that is designed to increase commerce through promoting small businesses. It is their job to lend money to small businesses, so your success is better than average with this route. You will still have to demonstrate creditworthiness and a good business model to qualify. They have many different loan packages that will allow you to find something to fit your needs. The loans are backed by the government so the lender wants to give you the loan if they can. 

Specialty Financing

Many companies exist solely for the purpose of financing a business. They want to provide you a franchise loan if you are worth the risk. If a traditional SBA loan is not for you, this could be a good route to take. They do not conform to the same process as other lenders and can be more flexible as a result. Their application process is usually faster and you can get your money as soon as possible.