Do you have the drive and entrepreneurial spirit it takes to run a franchise, but lack the funds to finance a franchise to get it off the ground? We know that this can be a common problem for potential franchisees, who otherwise have the perfect qualities and skills that it takes to successfully run a franchise business.
That’s why we want to share some potential avenues that you can pursue to finance a franchise, whether you’re interested in our Lincoln Franchise opportunity or some other type of franchise model. Here are seven options to consider to finance a franchise:
1-Small Business Administration (SBA) Loans
According to the Wall Street Journal, about 10% of all SBA loans in the U.S. are for franchisees buying franchises. The 7(a) is the standard SBA loan available for franchisees. These types of loans are lower risk because even though they are issued by conventional lenders, they are partially backed by the federal government. The 7(a) Program lets you borrow up to $5 million to cover startup costs and to pay for things like equipment and supplies that your new business will require.
If you belong to a credit union or have a good relationship with your bank, you may be able to obtain a business loan with favorable loan terms, especially if you can back the loan with your home or other tangible property and have a good credit score. Most lenders will want to see a business plan, and will also look at your experience and ability to run a successful business.
If you have fair to good credit, it’s typically easy to obtain a personal loan online. Sites like lendingtree.com or lendersclub.com not only let you review and compare offers from various lenders, but you can do everything online. Funding is usually fast as well, with many lenders depositing funds directly in your bank account within 1-2 days after loan approval.
Short-term business loans from a private lender can also be funded fairly quickly and often do not require as much paperwork as other types of loans. However, these often charge higher interest rates, and they must be paid back within a fairly short period of times, ranging from several weeks to one-two years.
5-Borrow from Yourself
If you’re fairly confident in your ability to run your own business, consider borrowing funds from your own savings or retirement funds. Since home prices are so high now, you another option is to refinance your home to cash in on its equity or take out a separate home equity line of credit (HELOC).
6-Borrow from Friends/Relatives
If you have parents, other relatives or close friends that are willing to invest in your business, take them seriously. Just be sure the expectations and terms are clear, whether you will be paying them back or cutting them in on a percentage of your business profits.
7-Use a Crowd-Funding Site
If you have a large network of friends, family, coworkers and acquaintances who you think would be willing to help you in your franchise endeavor, consider asking for funds through a crowd-funding site. The biggest advantage to this type of funding is that you never have to pay the money back. And if you really want to pay back those who helped you at some point, you can do so by offering them free or discounted services.
Use our Financial Pro Forma Tool
If you think you have what it takes to be a franchisee or would like to further discuss funding options for purchasing our franchise, contact us today. Our franchise model is a great opportunity for anyone interested in entrepreneurship, but is an especially good fit for those who already work in the title industry or in real estate, including real estate brokers and agents.