Five Paths to Franchise Financing

businessman pressing button virtual screensYou’ve found the ideal business in the thriving world of franchising and are ready to live the dream of business ownership where you are supported by the strength of a national franchisor.

As you ponder how to pay for it, there are several sources of funding that you may want to look into:

  • Home Equity: If you own enough of your home and feel confident about your business decision, you can take a second mortgage or set up a line of credit with your lender. You will not need a business plan for this type of financing so this method can often be the simplest route to business ownership.
  • Small Business Administration Financing: SBA backed loans can be a great source of funding especially for those who may not quality for traditional financing sources.
  • Traditional: This is where you go to a bank and get the money. You will need a pretty good credit rating, a solid business plan and some on-hand liquid capital. However, the rates can be very competitive if you meet all of the criteria and your franchisor might even help with your business plan.
  • IRA Money: You can roll your IRA money into a business loan. The advantage is that no penalties are associated with this conversion and you will not need a business plan or good credit because it’s your money.
  • Franchisor Programs: Some franchisors offer in-house financing or have established partnerships with lending companies. Because the lending company has confidence in the concept, it can be easier to get a loan.

You can also borrow money from family and friends. If you have built up good credit, you might even be able to get a loan online or quality for an unsecured business credit line.

The point is that there are several alternatives to franchise financing. Find the one that works best for you.