Raising Funds for Your Franchise Business: 6 Tips
If you are passionate about owning a franchise business and have the necessary skill-set, then don’t stop yourself from buying one. Here are a few effective tips that can help you raise funds.
1: Finance from Your Franchisor
If your franchisor is financing, then this could be an attractive opportunity for you, since the franchisor understands your fund requirements for that particular line of business. In the meanwhile, you can also look for cheaper funding.
2: Apply for SBA Loans
Small Business Administration (SBA) does not directly offer loans but partners with other financial organizations to provide loans on attractive terms and rates.
To avail an SBA loan, you need to fulfill the requirements of both SBA and the financial organization. The most popular SBA loan type for a franchise business is the 7(a) loan.
3: Leverage Commercial Bank Loans
The most common way to fund your franchise business is to apply for a loan from commercial banks.
You can repay the loans in monthly installments up to 30 years depending on the terms of the loan.
4: Go to Alternative Lenders
If you want to top-up your existing SBA or commercial loan, then you can go to alternative lenders, but expect shorter terms and stringent requirements.
They offer equipment finance, term loans, and loans depending on business lines.
5: Loan from Friends and Family
Loans from friends, family, and relatives are basically soft loans.
Even if you take it from your closest relative, insist on a contract which will be signed by both the lender and borrower.
6: Partnership Helps in Funding
Another source of funding is business partnerships. Since the partners are also involved in the business, they are likely to know about investment potential, but you still need to decide if you are comfortable with a business partnership in the first place.
The first rule of financing as always is understanding its pros and cons.
For more information on raising funds for your franchise business, Contact Us.