Few things are more expensive than starting or funding a preexisting franchise. In the latter scenario, you likely have help from the main brand, itself – but there are still countless expenditures for which you will require funding. As such, franchise financing is almost a field unto itself; we will explore some of the viable methods for obtaining the funds you need.
Traditional Funding Route: The Commercial Bank Loan
You’re likely very familiar with the way a commercial bank loan works; it’s the most common type used by the average consumer. Mortgages, student loans, and personal loans fall in this category. The key to securing the best interest rates is largely in your credit history and score. With a strong financial history, your rates can compare favorably with what federal loans from the SBA could otherwise provide.
Federal Government SBA Loan
The best type of loan when it comes to rates and longer repayment terms (which translate to manageable monthly payments); these loans are from the Small Business Administration select group of lenders. The US government is effectively a cosigner and guarantor that will guarantee up to 75% of the loan in the event of default. When it comes to franchise funding, you really cannot do better than the SBA 504 loan, which can release up to $20 million with a 30-year repayment term. The eligibility requirements and paperwork are considerable, however.
Unconventional Lending Options
This is the most liberal source of franchise funding, in that the number of options runs the gamut. You can use crowdfunding via online and/or offline sources; generally, it will be much easier to use a preexisting platform that’s geared towards crowdfunding than starting your own website – promotion will otherwise get very expensive or time-consuming.
You can also hit up family and friends for loans, with the promise of paying them back with interest as your business becomes successful. The primary benefit of this is that you need not be laden down with the monthly interest payments of a credit card or bank loan while you’re trying to build your business. There are, of course, potential downsides to the latter on the relationship front, if the business doesn’t pan out.
Revenue Park LLC successfully finances franchises of all types. Contact our offices today to get the funding you need.