In this article we’re going to discuss how you can finance the purchase of a new franchise. We’ll discuss where to find franchise financing and what you need to consider before jumping in. We’ll also give you some options to think about if you actually need working capital financing for your existing franchise. Before we dive in, let’s take a quick look at your two best options for franchise financing.
Ideally, your business will operate long enough and become successful enough that the company will get its own credit score and be able to qualify for a loan on its own. Building a business credit score requires your company to establish its own identity, including having its own tax ID number or employer ID number, obtained from the IRS. You'll typically also need a business credit card in the organization's name that's always paid on time.
If you are new to franchise ownership, be sure to do your research and due diligence about the franchise system you’re interested in. Study the Franchise Disclosure Document (required by law) and speak to other franchisees about the brand and the financing program on offer. Next, try to understand what your financial responsibilities as a franchise owner will be. This blog offers some pointers on this: Buying a Franchise – How to Determine What it’s Going to Cost You.
We have successfully provided franchise loans and restaurant financing to such recognizable and far-reaching brands (but not limited to) as Subway, CiCi’s Pizza, Meineke Car Care Center, Golden Crust, Golden Corral, Firehouse Subs, Kentucky Fried Chicken, Domino’s Pizza, IHOP, Burger King, Jack in the Box and Quizno’s, to name a few! Let’s continue the success story that your long hours and hard work have brought about and take your business to the next level!
Request a Regional Franchise Disclosure Document: According to Ronald Feldman at Apple Pie Capital, “In addition to the standard Financial Disclosure Document (FDD), I suggest new franchisees request a supplemental Item 19, which is required by law to be provided if available.” This can help you understand how the franchise performs in your own geographic location, which may be worse than the average performance nationwide.
An SBA loan has two major disadvantages for franchises. First, it takes a significant amount of time (30-90 days) to fund. Second, you can’t use the funds from an SBA loan to cover many startup costs, including franchise fees. Those will have to be paid as an out of pocket cost. However, if you can live with these two disadvantages, then SBA loan rates are typically the lowest you’ll find. You can use our SBA loan calculator to determine what your monthly payments might be.
There are more than 28 million small businesses in the United States, making up a whopping 99.7 percent of all U.S. businesses, according to the Small Business Administration. When you consider some of the most popular reasons to start a business, including having a unique business idea, designing a career that has the flexibility to grow with you, working toward financial independence, and investing in yourself — it's no wonder that small businesses are everywhere.
This website contains information concerning the franchise businesses on our platform, including a franchise disclosure document, that are either provided by or based upon information obtained from third parties. We have not independently verified the accuracy or completeness of the information contained in the franchise disclosure documents or information obtained from third parties. We do not endorse or adopt this information, and we do not make representations as to the accuracy, completeness, suitability or validity of any information obtained from third parties and will not be liable for any errors or omissions in this information or any damages arising from its display or use.
Outside of the typical startup costs, there are different costs that are unique to franchise businesses. First is the franchise fee, an upfront fee to the franchisor for the right to use the company’s branding and model. It can be paid in a lump sum or in installments, and varies widely by industry and company. It will likely to be at least $10,000 – sometimes substantially higher – and is typically nonrefundable. Franchisors are also likely to charge recurring royalty and marketing fees – usually arranged as a percentage of sales at the franchisee’s store – usually 4 to 8 percent for royalties and 2 to 4 percent for marketing.
Government small business loans help put your own business within reach. First there’s the quest for a decent location, then comes building a customer base, followed by all the initial hiccups of generating a cash flow before your business grows roots and gains momentum. The beginning of a business is crucial because it’s when you gain or lose market credibility. If you disappoint your customers, they may not give you a second chance. If your business gets off to a rocky start (most do), and you believe you can recover but need further financing to make this happen, you can apply for government small business loans.
When you're searching for B2B partners, you'll have to choose very carefully. These companies will have access to vital and potentially sensitive business data, so it's critical to find someone you can trust. In our guide to choosing business partners, our expert sources recommended asking potential vendors about their experience in your industry, their track record with existing clients, and what kind of growth they've helped other clients achieve.
Funds cannot be used for lines of credit, owner-occupied housing, projects involving over $1 million and include relocating at least 50 jobs or agricultural production. Funds also cannot be used to fund certain businesses including golf courses, casinos/racetracks, churches or church-controlled businesses, fraternal organizations or lending/investment companies.
As a member of the ConsumerAffairs Research Team, Kate Williams, Ph.D. believes everyone deserves easy access to accurate and comprehensive information on products and businesses before they make a purchase. She spends countless hours researching companies and industries before writing buyers guides to make sure consumers have all the information they need to make smart, informed buying decisions.
There is no one right answer to the question of how equity should be divided among a company’s co-founders. But everyone involved should discuss this issue and come to an agreement up front to avoid misunderstandings later on. If you are the original founder and brains behind the idea, a good argument can be made for more than 50% ownership. The split should take into account the following:
*Annual Percentage Rates (APR), loan term and monthly payments are estimated based on analysis of information provided by you, data provided by lenders, and publicly available information. All loan information is presented without warranty, and the estimated APR and other terms are not binding in any way. Lenders provide loans with a range of APRs depending on borrowers' credit and other factors. Keep in mind that only borrowers with excellent credit will qualify for the lowest rate available. Your actual APR will depend on factors like credit score, requested loan amount, loan term, and credit history. All loans are subject to credit review and approval.
Eligible funds received through this program can be used for business conversion, repair or enlargement; the purchase and development of land or buildings; the purchase of equipment; debt refinancing as long as new jobs will be created as a result; and/or business and industrial acquisitions when the loan will save and/or create jobs and/or the loan will keep the business open.
"Your product is built by people," Zawadski said. "Identifying your founding team, understanding what gaps exist, and [determining] how and when you will address them should be top priority. Figuring out how the team will work together ... is equally important. Defining roles and responsibility, division of labor, how to give feedback, or how to work together when not everyone is in the same room will save you a lot of headaches down the line."
Looking for a quick and easy way to get growth capital for your franchise? Look no further than Balboa Capital. We can provide you with the franchise finance solution you need, with the flexible terms you want. From franchise re-imaging initiatives to new equipment to property improvement programs, we finance it all… and fast. We have a long track records of success in working with many franchise brands, some of which we are a Preferred and/or Qualified Lender for.
Opening a franchise can be a smart choice for an aspiring entrepreneur. Becoming a franchise owner gives you the flexibility of owning your own business with the added security of being part of an established brand. However, as with owning any new business, start-up costs can be high and you may require infusions of capital if you encounter hard times. Franchisees must also pay a franchise fee when opening a new franchise, as well as ongoing royalty fees. You truly need a good business plan, healthy cash flow, and solid franchise financing to succeed.
If you are an expanding business and need money for relocation and/or renovation, you’ll be looking for a term loan, which is essentially a lump sum of cash that will be paid back within a set amount of time. Depending on what you expect for the long-term when you are in a growth stage, you may be looking for investors rather than lenders at this point.
If you can secure a credit card in your company name and make purchases and on-time payments, you can get financing and start building good business credit at the same time. Of course, the credit limit, interest rate, and terms of payment will vary, and each bank or credit union will have eligibility requirements, so this option will not work for everyone.