Buying into a franchise has several advantages. For example, you won’t have to build your business model from scratch. However, it can still be costly, and you may need to obtain financing. Just as with building your own business from the ground up, there are many loan options that can help you get your franchise off the ground.
Things to Consider When Choosing Franchise Funding
Before you get started on your journey as a franchisee, you must consider some of the costs associated with this- above and beyond the standard costs associated with starting a business. In most cases, you’ll need thousands of dollars for each step and if you don’t already have the cash on hand, you’ll need to secure funding of some sort.
Here are a few of the costs associated with opening a franchise:
• Legal fees for an attorney to review the franchise agreement before you sign
• Real estate/build-out costs for your location
• Franchise fees, ranging between $20,000 to $50,000
• Additional costs, such as inventory, day-to-day operations, and supplies
When you are choosing franchise funding, you must make sure that it will be enough to cover at least a portion, if not all, of these costs. There are some lenders that put restrictions on what the funds can be used for, so check their rules before applying.
Just like with other types of loans, you must consider several things before starting the application process. When it comes to franchise funding, figure out how much you need, what the interest rate is, and how long the repayment terms are. These factors can help you determine your minimum monthly payment and how long you will be making those payments.
Some of the other things to consider are collateral requirements, how detailed the application process is, and how long it will take to receive funds once approved.
Options for Franchise Funding
When you decide that you’re interested in buying into a franchise, you should start to research some of your franchise funding options. While you may end up taking out a loan, there are some other ways to get the funding you need, including:
• Franchisor financing
• Friends & family loans
• Commercial bank loans
• SBA loans
• Alternative lending options
Steps for Getting Approved for Franchise Funding
Now that you know the various types of franchise funding that are available, you’re probably wondering how you can apply and be approved. Ultimately, all funding and lenders are different and will have different requirements for approval. Therefore, you’ll need to ask each lender for their specifics. However, there are a few general requirements to get you started.
• Have a business plan
• Work on your credit score
• Be prepared with a down payment
• Have collateral ready to pledge
If you are considering opening a franchise, you will need funding to get you started. There are several options for franchise funding. You must take the time to research your options and determine which is right for you. If you need help, contact WHW Capital. We can explain your options and help you get started with the application process.