Franchisors may offer their own financing programs, or they may have a partnership agreement with a lending company. The lender is familiar with the franchise concept and would be familiar with the brand, which makes it easier to get funding from their partner company. If a franchisor doesn’t offer financing, you can research a wide range of financing options, including:
• Traditional Financing
In order to get a loan from many banks you must have a good credit rating. This includes available liquid capital, as well as a having a good business plan (banks are conservative in whom they award business loans to). Bank interest rates, however, are usually very competitive. Some franchisors will aide you in preparing your business plan so that it will impress the lending companies.
• SBA Approved Financing
The Small Business Administration (SBA) offers SBA approved loans. These business loans can be obtained by many hopeful business owners who do not qualify for traditional financing. These loans are very much in demand, especially in today’s economy.
• Investing Your Retirement Funds in a Business
Some companies will allow you to roll your 401K or other retirement funds into a business loan. There are no penalties assessed with this kind of retirement fund conversion. It enables you to invest in a franchise business without using your home or property as collateral.
• Home Equity Lines or 2nd Mortgages
If you own a large enough percentage of your home, you can take out a home equity line of credit or second mortgage. This option can be the easiest way to get the necessary cash to finance a business. A business plan is not necessary to be approved for this type of funding.
• Other Non-Traditional Financing Options
With good credit, you may be able to get a loan online. Also, some of the smaller private money lenders and business brokers will work with you if you need more personalized services.