Franchise Financing Options

Opening a franchise can be a great opportunity. Franchises reduce some of the risk of starting up your own business. However, opening a franchise requires significant money. Not only must a franchisee pay for the regular start up costs, but the franchisee must also pay a franchise fee (which may be $10,000 to $100,000 or more). The average person likely does not have all the necessary money in cash, so the franchisee must find franchise financing. There are many options available for franchise financing.

Franchisor Financing:
Some franchises will offer financing directly to the franchisee. This type of franchise financing could be one of two ways. The first is that the franchisor will offer a loan directly to the franchisee. The second way is that the franchisor can help the franchisee obtain franchise financing with a third party.

Bank Financing:
A franchisee also has the option of seeking out franchise financing on their own. A franchisee can go to a bank and try to take out a loan. A franchisee can go to the bank that they currently have a checking or savings account. However, a franchisee will be best served by seeking out those banks that offer franchise financing and deal with small businesses.

A franchisee must be prepared when seeking out franchise financing from a bank. Whether or not the franchisee gets the loan is dependent on the franchisees’ credit profile. A franchisee may also need to show a business plan and other financial statements to the bank.

U.S. Small Business Administration:
The U.S. Small Business Administration is an agency of the United States government that helps citizens interested in starting up small businesses. Franchises fall within the definition of small businesses, and thus franchisees can seek out help from the Small Business Administration in obtaining franchise financing. The Small Business Administration has programs where the government will guarantee the small business loan, which may help the franchisee qualify for a lower interest rate on the loan.

Friends and Family:
Another place where a franchisee can seek franchise financing is friends and family. If the franchisee has a rich uncle, then he may be in luck. The franchisee may be able to obtain financing from one family member or many. If the franchisee desires to make the franchise financing loan more formal, one option is to set up the loan through virgin money us dot com.

One thing to remember is that nothing can sour a relationship quicker than borrowing money and not paying it back, so if the franchisee chooses this option, do it cautiously.

Pay it Back:
Franchise financing means that eventually the franchisee will have to pay back the money, the financing is a loan and not a grant. The franchisee must make sure that they will be able to pay back the loan without adversely affecting the franchise or their personal life.

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