4 Best Franchise Financing Options

Combine the independence and control of running your own business with the stability, infrastructure and resources of a large corporation, and what do you get? A franchise.

Opening a franchise is an undeniably gratifying and exciting experience. Covering the associated costs with a business loan appropriate for your situation will help set you up for success.

Below is information about different franchise financing options to help you make the right decision for your new venture.

1. Commercial Bank Loans

Issued by banks, term loans are the most traditional type of business loans. The process is simple and straightforward: Once approved, the bank gives you a lump sum of cash which you are required to repay in monthly installments in the amount of time set forth by the agreement. You are responsible for paying interest on the loan, as well.

The application process is the bank’s attempt at determining that you are likely to repay the loan, so prepare for a dissection of your personal credit history and a look at your business plan.

2. SBA Loans

Partially backed by the United States Small Business Administration, SBA loans are a highly desirable franchise financing option. They also have some of the most stringent qualification standards and entail a lengthy application process.

That said, SBA loans can be downright difficult to get approval for due to the rigid qualification standards.

3. Franchisor Financing Program

Realizing they may need working capital, and wanting to grow the franchise, some franchisors make available franchise financing options created specifically for their franchisees. This type of financing takes into account the ins and outs of the business that franchisors know so well.

In addition to the franchise fees, some of these programs also cover other costs of starting a business such as purchasing equipment.

There is no one-size-fits-all franchisor financing agreement. They differ from company to company. So it is critical to make sure you fully understand the terms before you sign on the dotted line.

4. Alternative Non-Bank Lenders

One of the most attractive and accessible franchise loan options is getting financing through an alternative lender. When you go this route, you do not have to worry about rigid requirements many people cannot meet or a lengthy process that robs you of precious time. You can also avoid putting up personal and ancillary collateral.

Loan amounts are available in a wide range of amounts – as modest as $100,000 to over $2 million. You can also choose from a variety of loans to find the type that best fits your specific financing needs.

While some loan products from alternative lenders are a bit more expensive and have shorter repayment periods, a few go out of their way to keep interest as low as possible for borrowers.

The Best Franchise Financing Option

We even offer a six-month interest-only grace period on new units and relocations. And if you decide in the future you want to expand to a different state, out-of-state borrowing is available.

Looking to make your dream a reality sooner rather than later? ICA can get you approved and funded within 30 to 45 days.