Businesses need to form a relationship and pay for the license to sell another company’s products to buy a franchise. In layman’s language, the franchisee will buy the right to use the business products, brand, and name of another business, and the seller will be the franchisor. Buying a franchise entails paying various types of fees like advertising fees, royalty, and franchise fees. Even if business owners think finding a franchising business is difficult, the more demanding part of the equation is finding finances for the franchising.
However, there are various funding options that you can use for financing a franchise. Below are some of them.
If your franchisor is good enough, they will help you start your business and waive the franchising fee. Alternatively, the franchisor can partner with other lenders like commercial banks to help you raise capital as you start your business. A company that is willing to fund the franchisee will indicate it on its website and also on the tenth chapter of its disclosure agreement or document.
Franchise Financing Company
Some companies have specialized in funding businesses looking forward to financing a franchise. Such companies match the lenders with the perfect borrowers depending on their financial needs. The franchise financing companies could also lend to businesses that are starting up.
You can plan to borrow from your ordinary credit unions or commercial banks as you venture into franchising. Research shows that franchise owners are more likely to borrow from commercial banks and not business owners. Also, lenders prefer advancing cash to new franchises and not other new businesses because franchises have already gained trust. However, even if banks fund franchise businesses, you are still eligible for the bank’s lending and underwriting policies.
Like commercial banks and credit unions, SBA loans also help with financing a franchise to businesses. The most common type of loan you can receive from SBA is the 7(a) loan. If a new franchise or company wants to access the SBA-backed loans, they should apply through their lenders. Buying a business franchise requires heavy finances, which many do not have at their disposal. If all these options do not work for you and you are still looking forward to financing a franchise, contact KPI, and we will offer a loan solution.