Options for Financing a Franchise

Few franchises can successfully start without proper financing. Major upfront costs, marketing and all the running costs of the first few months are required for a successful start and long-term growth. If you’re considering starting a franchise, here are some popular and competitive franchise financing options that can help you become a successful franchise owner and avoid startup failure.

Before you select a financial package for your franchise, you need to understand your financial need. Most franchises require a franchise fee, which can be affordable or quite expensive. Depending on your situation, the size of your franchise and your location, you could need as little as $10,000 or up to $300,000 for a brand-new franchise location. Regardless of the cost, few franchise owners are able to self-finance their first location.

In order to lock down a specific price point, it’s time to make a business plan. Making a business plan before seeking franchise financing is the best way to identify the exact amount you need to borrow and boost your application and increase your chances of success.

Business plans submitted for financing should include a number of details. First, consider your sales projections and estimated expenses. Don’t stop at the startup expenses, but include a few months of expectations. Financial projects should be as detailed as possible. Add on the amount of working capital you’ll need to operate your business, as well as payroll and other continuing expenses.

Consider applying for franchise financing from a number of institutions. Your franchisor may offer a reasonable loan for your startup costs or equipment leasing. This can be a great source of funding, as they are highly motivated to help your franchise succeed.

A small business loan can be a competitive financing option, particularly if you’re unable to receive a traditional bank loan. These loans are designed specifically for small business owners who may not have the credit score or business history necessary for a traditional loan or line of credit. The interest rates and other terms are competitive, so you can use your small business loan to start and operate your franchise until it becomes financially stable.

Franchise financing is an essential part of starting your franchise. Whether you’ve already launched a franchise or are shopping for options for your small business, be sure to create a thorough business plan, identify your financial needs and shop for the best financing sources for your particular needs.

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