If you want to acquire a loan to buy into a franchise, you have several options available to you. Before choosing one, it is important to understand the factors that will affect it. Franchise funding can be easier to acquire than you may think.
Franchise Loan Expenses
You will incur several expenses when you attempt to secure franchise fundraising. This includes the franchise and legal fees, as well as the cost of supplies and operations. It is important to keep all of these expenses in mind when you are shopping around for a loan. Also, note that some lenders will dictate what you can and can’t use the money on.
Options For Franchise Funding
One of the options you have for franchise funding is the franchisor him or herself. It is not unusual for the parent company to help you get started running your own franchise. Unless you have already opened others, the franchisor is your most likely lender.
In the event you have friends or family who are willing to invest in your franchise, this may be the best way to go. It is best to only use this option if you are sure you’ll be able to pay the friend or family member back.
Many banks will extend a commercial loan to new franchisees. With this type of loan, you get the full amount right away. You are then obligated to make monthly payments (that include interest,) until you have paid back the loan in full. However, to qualify for a commercial bank loan you will have to submit many documents. This includes your franchise’s yearly benefit and business plan. You will also be required to submit proof of your credit score and put something up as collateral.
For various reasons, a commercial bank loan may not always be a viable option. In this case, another option is an SBA loan. With the SBA backing these loans up, banks are more likely to extend you one. Generally, you have longer to pay back than an SBA loan than any other type of loan, so you can make smaller monthly payments if needed.
You can find out more about franchise funding by contacting New Horizon Capital Funding.