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Franchise Financing Basics

Here are some financing options for small business owners who want to franchise their business:

  1. Franchisor financing: If you need funding to purchase a franchise, your first conversation should be directly with your prospective franchisor. Many franchisors offer financing programs to help franchisees get started.
  2. Commercial bank loans: Another common way of financing your franchise is through a traditional term loan from a bank. Banks will often offer longer terms and lower interest rates than alternative lenders but banks are currently pulling back on their loans due to recent banking turbulance.
  3. SBA loans: SBA loans are partially backed by the U.S. Small Business Administration and funded by intermediaries affiliated with the SBA. SBA loans are similar to traditional term loans from a bank or alternative lender.
  4. Alternative lenders: Alternative lenders offer a variety of loan options for franchise businesses. These loans will likely have higher interest rates than traditional bank loans but can be helpful to new owners or those with lower FICO scores.
  5. Crowdfunding: Crowdfunding is another option for small business owners who want to franchise their business. Crowdfunding allows you to raise money from a large number of people who are interested in your business.
  6. Friends and family loan: If you have friends or family members who are willing to invest in your business, this can be a great way to get started.

I hope this helps! Let me know if you have any other questions.