4 Types of Franchise Financing for New Owners

Buying into the right franchise can be the best decision for a new business owner. If you have the perfect franchise in mind, the hardest part might just be securing the funding you need to get your new business started. Fortunately, there are a number of lending options that can provide franchise financing. Here are four choices worth considering.

1. Small Business Administration

Getting approved for an SBA loan can be difficult for some, mostly because the competition for these loans is fierce. If you’re in good financial standing and joining a respectable franchise, you’ll be seen as a less risky candidate than someone who is launching a startup or doesn’t have a great credit score. There’s no guarantee you’ll be approved, but it’s at least worth a shot.

2. Online Lenders

There are a number of alternative lending sources that can provide franchise financing. Some of the peer-to-peer lending companies even specialize in funding franchisees, and those options typically pay out much more quickly than a standard bank loan. Be careful that you don’t get saddled with an astronomically high APR, but do take the time to see what you might get from an online lender.

3. Private Investor

Many investors would rather fund individual business operations than let their money waffle on the stock market. By finding a private investor to help fund your franchise operation, you have the chance to gain a business partner who will be willing to offer expert advice and guidance throughout the early stages. In many cases you may be required to give up stake in the company or a high percentage of early profits, though the financial help and business acumen you get in return may be invaluable.

4. Personal Cash

It’s not that common that entrepreneurs have the resources to back their endeavor. However, this is often the best way to set yourself up for future outside funding. Many lenders only provide capital to business owners who have personal equity invested in their business. If you’re able to foot the bill at the outset, it will be much easier to get financial backing in the future. This option will also allow you to put future earnings towards business growth instead of repaying debt.

Franchising has changed the lives of millions of business owners, and you can experience similar success with the right approach. There are plenty of franchise financing options to research, and starting with any of the four above should put you on the right track.