Getting a franchise deal and having your branch could be a lucrative and low-risk way of earning passive income. Most franchises would provide managerial and marketing support in a way that you barely have to worry about anything, and you’ll reap the benefits and profit at the end of the day. But the hardest part of getting a franchise is getting the capital; to have enough money to pay for the franchise fee and other start-up costs. You’ll also need a down payment, and show the franchisor that you have the means to purchase the franchise.
But, worry not, there are a lot of ways for you to get the funds you need. So if you’ve looked around for franchise opportunities and have already chosen one, whether it’s for a gourmet burger franchise, convenience store franchise, or a service franchise, here are options you can take to finance your franchise:
Franchisor Financing
When you’ve decided to purchase a franchise, your first decision should be to discuss your options with your chosen franchisor. A lot of corporations that offer franchise deals often have financing options for those interested in investing and purchasing a franchise. Usually, this entails partnering with other lenders or have the corporation provide the capital for you. Some franchisors would even let you lease the equipment required. Additionally, you could also check if you could qualify for any incentive programs that could provide discounts to the franchise fee and other startup costs.
The most significant advantage of this option is that you wouldn’t have to worry about paying other lenders, financial institutions, or individuals; instead, you’d have a one-stop solution to get both the franchise and the funding needed.
Bank Loans
Your next option would be the traditional way of getting a term loan from a bank. Banks often offer to provide the lump sum needed for the franchise which you’ll have to repay monthly with interest for a certain period, depending on your loan terms. Do take note that the bank is quite stringent when it comes to huge loans, and would check your credit history and assess if you’re worth the “risk”. So it would be best that you clear up any issues with your credit rating and anything that might increase your “risk” rating in the eyes of the bank — this would be recommended when opting for franchisor financing.
SBA Loan
SBA loans are one of the most desirable options for franchisees and are backed by the Small Business Administration and lending partners. These are quite similar to traditional bank loans, but they reduce the risk for lenders/lending partners by promising a portion of the loan amount. Sometimes, the SBA may even guarantee to the bank or lender that it will repay the loan if you ever default. As such, you’ll be able to get lower rates and longer terms than you usually would when getting a loan from a bank or alternative lenders. However, the SBA has a list of the approved franchisor, and it may be possible that your chosen franchise isn’t on the list — although it’s still possible to get an SBA loan if your franchisor isn’t in the list, it could take a longer time to process the loan application. Additionally, to get SBA loans, you would usually need to have a good credit score and provide down payment.
Get a Business Partner
It’s possible to start a franchise without any cash by simply finding the right people who have the funds. Your business partner(s) would share or cover the capital needed and would get a portion of the profits from your joint venture. Often you can have friends or family as your business partners, as it is essential to be partners with people you know and trust. And it would be a better proposition to be business partners with family and/or friends instead of simply asking them for a loan.
Conclusion
There is no shortage of options for you to get funding for your target business franchise; as they say, “when there’s a will, there’s a way.” So if you’re 100% sure that you’re ready to jump into the world of business or wish to augment your income, then you better start taking the necessary steps to get the funding you need and look around for available franchise opportunities you can take advantage of.
