Franchise Financing
Franchise financing provides funding tailored to opening and operating a franchise location. Financing covers franchise fees, real estate, equipment, inventory, working capital, and other costs to start or expand.
Franchisors often guide new franchisees to preferred SBA lenders they regularly work with. Franchise SBA loans make financing more accessible given the proven franchise business model.
Financing is structured around the franchisor’s timeline for opening and operating requirements. Multi-unit franchise operators can secure financing to scale.
To learn more about how franchise financing can help start or expand your business today, complete our 15-Second Online Application here to speak with a business financing advisor.
Tips for Utilizing Franchise Financing
Study the Franchise Disclosure Document to understand all startup and operating costs needed for financing requests. Consult the franchisor on financing partnerships they recommend.
For new locations, request turnkey financing to cover the full initial build-out and equipment in addition to franchise fees. This preserves capital for working needs once open.
With SBA loans, work with an experienced certified lender to navigate requirements. While flexible, SBA loans limit use of funds for specified purposes. Manage accordingly.
Benefits of Franchise Financing
Franchise financing provides capital to establish a location for a proven brand without requiring owners to sell existing assets or personally finance. This preserves personal capital and retains ownership.
Franchisors steer lenders to new franchisees they believe have a strong chance of success. This sponsorship can ease the application and approval process relative to independent startups seeking loans.
The franchise brand strength often allows for more favorable lending terms and larger loan amounts than available for independent small businesses in the same industry.
Franchise Financing Requirements
- At least 20% liquid assets for down payment
- Minimum credit score around 600
- Previous experience in industry or management
- Sufficient income to cover living expenses
- Commitment to hands-on franchise management
- Willingness to personally guarantee loan
- Alignment with franchisor requirements
- Acceptable location with traffic patterns
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How to finance a franchise business?
When you’re looking to finance a franchise business you may want to reach out to your franchisor to see if they have any available options to help with your financing needs. Regardless, you may still want to shop around because you may be able to find cheaper options on your own. Alternative lenders generally have financing options for franchises that may assist with your franchisor mandated updates, at a lower cost. Once you have determined the type of financing you’re looking for and the lender you would like to work with, you will have to complete an application, and provide necessary paperwork such as bank statements, personal credit reports, drivers licences and voided check. ROK Financial has access to franchise financing options. To learn more complete our 15-second online application and speak with a business financing advisor today.
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What sources of financing are available to a franchisee?
When it comes to sources for financing a franchise there are many options available. Options include: 1) Franchisor financing 2) Traditional bank loans 3) SBA Loans 4) Alternative lenders 5) Family and friends. It’s best to consider all your options when looking to finance your franchise to see what products fit your business needs best. Learn more about different sources of financing that are available to a franchise by completing our 15-second online application.
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