If you’re interested in starting your own business but don’t know where to start, a franchise might be a good option. However, unless you are independently wealthy or you have savings, you are going to need financing for your business.
In this article, we’ll offer you a few funding options for financing your franchise. We will also explain what you should and should not do when it comes to franchise funding.
Options for Funding Your Franchise
When it comes to funding your franchise, there are several options, including:
Franchisor financing: some franchisors are willing to finance the purchase of the franchise.
Traditional bank loans: if you have a decent credit score, a solid business plan, and a relationship with a bank, you may be eligible for a commercial bank loan
SBA loans: the SBA offers several loan programs, including the 7(a) or 504 loans. In this type of loan, the SBA guarantees a certain percentage of the loan, making it attractive and less risky for the lenders.
Alternative lenders: if you do not qualify for commercial loans or SBA loans, you may consider alternative options. The approval rate is much faster- but the rates are high and terms are shorter.
Personal assets: if you do not have the cash to cover your startup costs, consider using your assets to fund the venture- as long as it does not impact your own financial stability.
ROBS (Rollovers as Business Startups): typically, if you withdraw money from your retirement before you are eligible, you must pay a penalty. However, the ROBS allows withdrawals without penalties.
Crowdfunding: some people choose to turn to online forums to raise the money for their franchise efforts.
Loans from friends and family: if none of the above options work for you, consider asking your friends and family for a loan- but keep in mind that this could cause the relationship to become strained.
Do’s & Don’ts of Franchise Funding
When it comes to financing your franchise, there are certain things that you should and should not do. We’ll explore these below:
Do’s of Franchise Funding
Below are a few of the things you should do when you’re seeking funding to buy a franchise.
- Carefully weigh all of your options, considering the advantages vs. disadvantages of each one.
- Make sure to do your research and make sure that your personal finances are in order.
- Obtain a pre-qualification to find out ahead of time just how much you qualify for.
- Decide if you want to own more than one unit.
Don’ts of Franchise Funding
Below are the things you should not do when seeking franchise financing:
- Don’t give up on obtaining funding
- Don’t underestimate your funding needs
- Don’t assume all providers are exactly the same.
- Don’t wait until the last minute.
Learn More about Financing Your Franchise
If you want to start your own business but are hesitant about starting it from the ground up, a franchise may be a good option. If you want to know more about financing a franchise, contact Abundant Wealth Financial today. We can help you evaluate your situation and determine which option is best for you.