Out of all the possible commercial real estate ventures, it’s quite possible that obtaining franchise funding is the most difficult endeavor. The resources necessary can be enormous; however, there are plenty of sources available. Some will suit you better than others – depending on factors like your creditworthiness, the amount of funding required, the projected loan term necessary (short or long-term loan), and the specific branch of commercial real estate in which you’re interested.
The Small Business Administration is a Viable Source
SBA loans are excellent for franchise funding – as long as you can meet the robust requirements. They offer the best terms possible (in most cases, save for very special private offers), and present a lot of paperwork for the prospective franchisor. The SBA 7(a) loan is the general one; but the SBA 504/CDC is more substantial and is often used for hotels, franchises, etc.
Not surprisingly, first, you have to get your chips in order and make sure you qualify for franchise funding – whether you wish to use a federal loan or seek private lending. The primary means of establishing your ability to pay will be your credit history; then, the collateral you possess. If you have a business established already, then you will qualify much more easily if all your assets are available as collateral.
Forms of collateral include home equity, hard assets, business equipment, property, etc. this is what you will lose if you default on the bank loan. It’s a great idea to determine your eligibility for an SBA-backed loan for your intended franchise before you seek out banks and private financial institutions. Several franchises have already been pre-approved, so if at all possible, it’s best to go with one of those.
If you’re seeking private franchise funding for whatever reason, then look for franchisors that have shown a willingness to lend money for that purpose – they often have a dedicated department that handles this.
For financing solutions to purchase your next franchise, contact New Horizon Capital Funding.