Despite economic headwinds, franchises continue to play a significant role in the U.S. economy. In fact, franchises are projected to grow by nearly two percent in 2024, adding 221,000 jobs.
However, as any aspiring or current franchisee likely understands, cost is often a major issue. You have franchise fees to worry about, as well as all the other costs that accompany starting or expanding a franchise.
With its established brand and business model, a franchise easily entices the interest of entrepreneurs. At the same time, the startup costs of a franchise can run between $20,000 and $1 million.
If you’re like most hopeful or existing franchisees, you don’t have that kind of money for a new business or expansion. That’s why you need franchise financing. Here’s a guide to finding franchise financing options for your future.
What Is Franchise Financing?
Franchise financing can help you buy, open and run a franchise. Until you earn a profit, most franchisees may not be able to personally fund the necessary expenses, such as the:
You can apply for financing options designed specifically for franchises.
Franchise Financing Options
As a future franchisee, you have many franchise financing options available to you. Depending on your situation, you might find a single financing solution that fits your goals. Alternatively, you can combine multiple options to meet your needs.
SBA Loans
Small Business Administration loans, such as the type 7(a) loan, can be well-suited for franchises. They offer favorable rates and terms since they are partially backed by the U.S. government.
Commercial Bank Loans
You typically must have a good credit history, collateral and a detailed business plan. The rates and terms can vary based on your financial profile and the specific lender.
Equipment Financing and Leasing
If you need new equipment or are looking to expand, equipment financing or leasing options can be customized to the needs of your franchise.
Alternative Lending
Online lenders or non-bank financial institutions — known as alternative lenders — can provide franchise financing if you can’t qualify for a commercial bank or SBA loan. Often, you’ll find faster funding, a simpler application process and more flexible terms. These financing options cater to helping franchises expand or get off the ground.
Obtaining a Franchise Loan
No matter which financing option you choose, here’s how to pursue the franchise financing you want:
Being prepared can help you win the financing you want to open or expand your franchise.
Find Financing Professionals
If you’re looking for financing to open or expand a franchise, consider getting the help of financing professionals. At Barrington Commercial Capital, we offer valuable guidance and insights into franchise financing options. Get in touch with us today.
