Franchise Financing 101: How to Fund Your Business
General Business

Franchise Financing 101: How to Fund Your Business

Dreaming of your own business? Finding the proper franchise is often the fun part — imagining yourself at the helm of different endeavors and enjoying the excitement of leaping into a new industry.

But the financing and logistics of bringing your vision to life can be tedious. You must account for every detail possible. If you’re struggling to discern which business opportunity is the best match for your skillset and financial situation, why not meet with a franchise consultant? Well-versed in the industry, we can not only help you find the right franchise but also guide you through your next challenge: obtaining financing for your new business venture.

Whether you’re ready to invest in your chosen franchise or you’re still in the research phase, we’re here to help. To get you started, here’s an outline of the most common forms of franchise financing available for franchisees. Read on to learn more about how you can fund and kickstart your franchising journey.


Getting Help from Your Franchisor

In some cases, franchisors will assist their franchisees in the beginning stages of business. Typically, this entails waiving the franchise fee. In addition, franchisors sometimes join forces with lenders like commercial banks to assist in raising funds to begin the franchise. 

To know whether or not your franchisor can assist you through the startup process, look on their official website or chapter ten of the franchise disclosure document. And while some franchisors can help with financing, ensure that you compare their terms to other funding sources — there may be better options available to you.


Applying for a Franchise Business Loan

Traditional loans are always an option to obtain financing for your franchise. It is most common for new franchisees to get loans from commercial banks or credit unions. Since you’re interested in starting a franchise and not a new business, it will be much easier for you to obtain financing. Franchises come equipped with an established brand name and proven business model, which makes banks feel more assured in the investment and willing to front you the money you need.

However, it is crucial to remember that commercial banks will still subject your franchise to their lending and underwriting policies. Furthermore, you’ll also need to possess the proper credit history and net worth, just as you would with any other commercial loan. To obtain a traditional loan for your franchise, it might be necessary to provide collateral as well.

The most common loan for new franchisors is the 7(a) loan the SBA offers. The difference between an SBA loan and a traditional loan is that SBA loans are partially guaranteed by the government. In addition, SBA loans are typically for a higher amount, with lower interest rates and a longer repayment period. But SBA loans are still akin to commercial banks and credit unions. To access SBA loans as a new franchise, you’ll need to apply through their lenders. 


Qualifying for Franchise Financing

Qualifying for financing can be challenging for any eager franchisee. As with any loan, you will need to prove that you can earn the financing that you obtain. Be prepared for lenders to check your credit history to determine whether or not you have handled your debt responsibly. Ensure that you check your credit report so that you are prepared to explain any mishaps that may appear. In addition, arrive with your business plan, marketing plan, projections, and cost analyses. Having all this necessary information will help you look professional and stack the odds in your favor, simplifying the process of obtaining a loan for your franchise.


Hundred Acre Consulting

Discerning the best way to finance your new business venture is a crucial but daunting element of your success. If you’re worried about choosing the right franchise and financing options, Hundred Acre Consulting can help. With years of experience, we can assist you in choosing the best franchise for your skillset and guide you through the process of building a lucrative business.

Ready to find the franchise for you? Contact Hundred Acre today, and let’s get started!



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