A 2018 study from Vistaprint found that three in five Americans want to make their dream of owning a business a reality. It’s likely that the idea has crossed your mind.
However, the same study found that the top three barriers Americans face are financial concerns, lack of access to funding/finance and fear of failure. Fortunately, franchising can offer individuals both the freedom and independence of being a small business owner while at the same time, providing the support and infrastructure of a large corporation.
Depending on the industry, however, opening a franchise can also require a significant amount of capital that many people don’t have readily accessible. Fortunately, just like the act of franchise ownership itself, aspiring entrepreneurs don’t have to enter alone – from franchise financing to franchise loans and more, there are several avenues you can explore to help make your dreams of franchise ownership a reality. Here are three examples:
1) Franchisor financing programs
Before you consider traditional bank loans or third parties, take a look at the franchisor itself! Yes, it’s possible that you can seek out franchise financing from the franchisor, or through a partnership it has established with a lender. Even if the particular franchise you’re interested in doesn’t offer its own financing, it’s possible that you can be connected with lenders who’ve worked with and approved previous franchisees in the past. It doesn’t hurt to ask!
2) SBA Loans
During your search of different franchise financing methods, it’s likely you stumbled upon SBA loans. An SBA loan, one of the most popular types of franchise loans, is a business loan that is partially guaranteed by the U.S. Small Business Administration and funded by their lending partners. SBA loans are particularly attractive to both lenders and borrowers. Why? The SBA reduces the risk for lenders by backing a portion of the loan amount, and SBA loans tend to have more flexible limits, interest rates and payments than typical bank loans. However, it’s important to note the qualifications required to be approved for an SBA loan, as the application process is lengthy.
3) Friends and family franchise loans
You’ve heard of “friends and family” discounts at stores, but believe it or not, one of the most common ways to finance a franchise is to ask friends or family for some help. Whether you’re looking to bring in a familial business partner, borrow the money outright or ask for a gift, these are all viable options when it comes to franchise financing. However, it’s very important to ensure that every individual involved understands the agreement, expectations and in some cases, terms of repayment. You’ll want to create a contract that covers all the bases.
These are just a few examples of franchise financing methods that are worth pursuing. Even if you don’t have all of the necessary capital up front to open a franchise (don’t worry, many people are in the same boat), franchise loans and financing options exist to serve as a launching pad for responsible and passionate future business owners to pursue the American dream.