Franchise Financing: Finance Your Franchise Business
Getting funding to grow your franchise can be a challenging task. You’ve poured so much time and effort into starting your small business and now you need the proper funds to grow. What are the options for franchise financing? How can you get approved for financing?
We’ve got you covered. We are going to highlight some of the best franchise financing options and discuss how you can get approved. Read on to find the right source to help your franchise thrive.
A Franchise’s Financing Options
Finding franchise financing shouldn’t be a difficult process. That’s why we’ve outlined some of the best options for franchise owners to consider.
SBA 7(a) Loan
SBA 7(a) loans are a popular franchise financing option because the loan amount can go up to $5 million dollars. These loans can be used as short- and long-term working capital, to refinance business debt, to purchase real estate, or to buy supplies such as furniture.
SBA 7(a) loans can be a bit difficult to get approved for because so many small businesses apply each year. There are also requirements that must be met to secure funding. A small business must be able to show their need for a loan, must have used alternative financing resources including personal assets, have invested equity, and more.
Although SBA 7(a) loans are desirable, they might not be the easiest loan to get for your franchise. Do your research before deciding to apply.
SBA 504 Loan
SBA 504 loans are provided exclusively by Certified Development Companies (CDCs). These CDCs are community-based partners of the SBA who help promote economic development. An SBA 504 loan differs from a 7(a) loan in the fact that it cannot be used as working capital.
The funds from an SBA 504 loan can be used to purchase real estate, construct new facilities, buy machinery, upkeep current facilities, or improve parking lots, landscaping, etc. The loan’s repayment terms can range from 10 to 25 years. This franchise financing option is ideal for franchisees wanting to relocate or open another business location.
Fixed Rate Business Loan
Fixed rate business loans are a great franchise financing option because they are flexible and have fixed interest rates. Franchise owners can use the funds from a business loan as working capital to expand their business, buy supplies, furniture, and more.
These loans have a set repayment schedule and can vary in terms. Collateral is generally not required for business loans making this an excellent franchise financing option.
Business Line of Credit
Franchise owners can use a business line of credit to pay for unexpected business expenses, buy inventory, or manage cash flow. Borrows can borrow funds up to their specified limit, which generally ranges from $1,000 to $250,000.
To qualify for a business line of credit, you will need to have been in business for at least six months and have $25,000 in annual revenue. The good thing about a business line of credit is that funds can often be accessed quickly.
Crowdfunding
Crowdfunding is another franchise financing option. To start a successful crowdfunding plan, you will need to write a business plan, outline marketing strategies, provide investors with perks, and more. This method of financing can be successful for some small businesses, but it takes time to see funds start rolling in.
As you can see, there are several options to consider when looking for franchise financing. Each one has its advantages and disadvantages, and the best way to choose is to evaluate your business’ needs and credit history. If your credit is poor and you are struggling to get a loan, you might consider alternative financing options for your business.
Next, we will share a few things to consider before applying for a loan that affects your chances of approval.
Improve Your Chances of Getting Approved for Franchise Financing
Once you decide to apply for franchise financing, how do you know if you will get approved? Well, there’s no definite way to know if you will be approved for a loan. However, to improve your chances of getting approved for franchise financing, consider the following:
- Build your credit history. Strong credit history and a high credit score will go a long way when applying for business funding. If you don’t need a loan immediately, work on building your credit to increase your chances of being approved.
- Pay down personal loans. If you have any personal loans, work on paying those down before applying for a business loan. This will ensure your credit-to-debt ratio is appropriate.
- Find the right lender. Spend time researching and speaking with different lenders to find the right fit for your franchise. Work with a qualified lender to make the process as smooth as possible.
Now you know some of the best franchise financing options you can consider for your business. Read on to learn how to get the means you need to grow your business.
LendThrive’s Fixed Rate Business Loans
The team at LendThrive, part of the AVANA Family of Companies, wants to see your franchise succeed. Get a fixed rate business loan up to $150K from LendThrive. With fixed low interest rates and flexible terms, what’s not to love?
Grow your business with LendThrive! Apply for a fixed rate business loan today or contact us for more information.
