Jeff White is a staff writer and financial analyst at Fit Small Business, specializing in Small Business Finance. As a JD/MBA, he has spent the majority of his career either operating small businesses (in the retail and management consulting spaces) or helping them through M&A transactions. When he is not helping small businesses, he spends his time teaching his five kids how to become entrepreneurs.
More Franchise Loans, More Franchise Launches, More Franchise Revenue. In today's economy many top franchises face a significant challenge: access to funding. With ample interest from entrepreneurs ready to open new locations or expand existing ones, the difficulty of accessing capital significantly slows the execution of opening such franchises, costing both the franchisee and franchisor time and money.
Working capital loans. A working capital loan is a debt borrowing vehicle used by the company to finance its daily operations. Companies use such loans to manage fluctuations in revenues and expenses due to seasonality or other circumstances in their business. Some working capital loans are unsecured, but companies that have little or no credit history will have to pledge collateral for the loan or provide a personal guarantee. Working capital loans tend to be short-term loans of 30 days to 1 year. Such loans typically vary from $5,000 to $100,000 for small businesses.

Equipment loans. If you’re specifically looking for cash to fund the purchase of new equipment – including vehicles, manufacturing or production machinery, farming equipment, or other necessary equipment – then an equipment loan or leasing program may be what you need. Like business loans, equipment loans offer fixed interest rates and payment plans over a period of time.


The Small Business Administration (SBA) is committed to helping small business owners get the funding they need to successfully start and run their business. The SBA is not a direct lender but rather sets guidelines for loans made by their partners. The SBA guarantees loans for select businesses, meaning they agree to pay the loan off if the owner defaults, which makes it easier for entrepreneurs to get funding.
Biz2Credit can help entrepreneurs secure franchise business financing through its network of hundreds of lenders willing to grant loans. We have helped secure franchise loans for the owners of Dunkin' Donuts, Johnny Rockets, Subway, and other successful franchisees. Veterans, which are increasingly becoming franchisees, can refer to Biz2Credit's page on franchise loans for veterans.
Never start a business as a “sole proprietorship,” which can result in your personal assets being at risk for the debts and liabilities of the business. You will almost always want to start the business as an S corporation (giving you favorable flow through tax treatment), a C corporation (which is what most venture capital investors expect to see), or a limited liability company (LLC). None of those are particularly expensive or difficult to set up. My personal preference is to start the business as an S corporation, which can then easily be converted to a C corporation as you bring in investors and issue multiple classes of stock.
A franchise ACH merchant cash advance is very similar to a MCA split in that they are both not considered “loans” but are instead the sale of the franchise’s future earnings. The difference between a MCA and an ACH is how the funder is repaid for providing financing to the franchise. As mentioned previously, a MCA lender will collect repayment by splitting merchant processing sales. With an ACH advance the repayment is made by having the funding company take a set amount from the franchise’s bank account each business day until the advance is repaid.

The brand you choose to work with may provide upfront estimates of how much it will cost to start a new business and can also give you information on monthly and year-over-year revenue goals and expected progress. This information, if available, is often found in Item 19 of the FDD. However, a franchise is not required to provide this information in their FDD - so speaking with several existing franchisees is always a wise choice. Based on this data and your own projections make sure you understand when your business will break even factoring in both expenses as well as the loan payments and always assume there will be unexpected costs. When determining your loan amount make sure to include working capital to get you through the ramp-up period of the business until the business can support expenses and loan payments. When lenders review your loan application they will pay attention to several key things, but 2 items that you should be aware of are Loan To Value (LTV) and Debt Service Coverage Ratio (DSCR). LTV is a measure of the total value of the loan amount compared to the collateral pledged. Lenders will look at the collateral as a secondary source of repayment of the loan and in many cases with a start-up financing may look for collateral to cover the full loan. In cases where there is not enough collateral the lenders will look to other strengths of the deal. DSCR is a measure of the cash generated by the business available for the loan payments. The higher the DSCR, the better because in the bank's view there will be a cushion of cash just in case there are unforeseen problems or slow periods for the business. A lender will typically look for a minimum DSCR 1.20x or more. If your projections don't show the ability to service debt lenders may shy away from your loan request so it is important to understand the accuracy of your projections.
A contract is, in essence, a written meeting of the minds. While it is typically drawn up by one party and favors the needs and requirements of that party, protecting them from most (if not all) liabilities, it should initially be thought of as a work in progress that changes and grows as each party contributes prior to signing, after which it becomes an official document. “Consideration,” whether it is monetary or a promise to do work or provide a service by a specified date, is at the root of a contract.
For these reasons, many franchise owners are turning to the alternative lending space for better financing options. Online lenders are generally more lenient in their borrower requirements and they also offer a much faster time to funding than traditional bank loans, often depositing funds in your account within a week of receiving your application.
Market research is important because it will help you figure out whether or not there is demand for the service you’re offering or the product you’re selling. It will also help you when it comes time to write your business plan, especially if you’re pitching an angel investor or a venture capital firm. They will want to see there’s a market for your idea, otherwise, it won’t scale as rapidly as they need it to in order to make a return on their investment.

Now that you have completed our QuickBooks Online tutorials, you should be convinced that you don’t have to be a certified public accountant or have an accounting background to learn how to use QuickBooks. You should also know that QuickBooks is a much better solution than using a Microsoft Excel spreadsheet to keep track of your income and expenses.

Despite these indicators, financing remains a problem for potential franchise owners.  According to Entrepreneur magazine (January 2013), there’s still an 18 percent lending shortfall in the franchising industry. In a bid to boost franchise ownership, many franchisors are taking matters into their own hands and offering financing programs of their own. Meineke, The UPS Store, Gold’s Gym, Masasge Envy and Instant Imprints are just a few examples of franchisors now offering financing to qualifying first-time and multi-store franchise owners.
Are you thinking about starting a small business, freelancing, or turning a hobby into a full-time job? Or perhaps you're already running your own business and need some inspiration to take it to the next level. Each week, join small business coach Dave Crenshaw for two short lessons that reveal the secrets of running a successful small business. This series covers topics such as getting started, writing a business plan, determining your most valuable product or service, hiring people, managing processes, documenting systems, bootstrapping, seeking funding, accounting, controlling costs and profit margins, marketing, creating culture, and more.
Real estate investment is a great business. However, the SBA will not guarantee loans for business that do what they consider speculation. Unfortunately, real estate investment is considered speculation. We may be able to get you a non SBA business line of credit up to 150K. If you are interested, please fill out our pre-qualification form and we will schedule a call to go over your options. https://keycommercialcapital.com/prequalify/
Small business term loans. Term loans are typically for a set dollar amount (e.g., $250,000) and are used for business operations, capital expenditures, or expansion. Interest is paid monthly and the principal is usually repayable within 6 months to 3 years (which can be amortized over the term of the loan or have a balloon payment at the end). Term loans can be secured or unsecured, and the interest can be variable or fixed. They are good for small businesses that need capital for growth or for large, onetime expenditures.
For these reasons, many franchise owners are turning to the alternative lending space for better financing options. Online lenders are generally more lenient in their borrower requirements and they also offer a much faster time to funding than traditional bank loans, often depositing funds in your account within a week of receiving your application.
Being that each franchise launch means the business doesn’t have existing/trailing revenue, opening a franchise business is essentially opening a startup business. As with startups, the small business lending options are limited — but available. Other franchises are existing entities and are looking for capital to help with operating expenses and other working capital options. Here are the main options:
The staff at Key Commercial Capital was wonderful. They made sure to explain all our options in detail and were always interested in the best for us. They verified our documents before submitting for approval to ensure everything was in order and that the application and closing process was as smooth as possible. They were also very responsive and available at all times. I will certainly be back on the next opportunity.

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.
If you are using the web to help you acquire a loan, beware of "Free" services, sites not certified by TRUSTe or sites with poor Better Business Bureau ratings. These sites may just want your contact information which they then sell to brokers and lenders. It is not a very efficient way for you to get financing and may lead to wasted time, money and calls from unsavory and unqualified sources. Also, make sure there are no hidden fees that either you or the lender will need to make - or guarantees that you will receive a loan.

According to Meme Moy, a spokesperson for FRANData, about 2,000 franchises are currently on the Registry. When a franchise is on the Registry, lenders can see its historical loan performance. About 55 % of lenders only lend to franchises that are on the franchise registry, so this an important step in choosing a franchise. By choosing a franchise that is on the Registry, you can get better and faster access to SBA funding. To check if your franchise is on the Registry, click here.
Terms of Service and Privacy Policy. If you are a company that conducts its business on the internet, it is important to have a terms of service agreement that limits what users can or cannot do on your website and with the information on your site. Closely related is your Privacy Policy, which sets forth what privacy protections are available to your users. The new European GDPR rules may also need to be addressed.

Shelton recommends meeting with a loan officer a few weeks to a month ahead of time to personally meet the loan officer and find out if the bank is currently interested in lending the type of loan you are looking for: “You want the loan officer to be on your side,” Shelton explains, because the loan officer usually doesn’t have the approval level to say yes to a loan.


Startups should also understand that the venture process can be very time consuming—just getting a meeting with a principal of a VC firm can take weeks; followed up with more meetings and conversations; followed by a presentation to all of the partners of the venture capital fund; followed by the issuance and negotiation of a term sheet, with continued due diligence; and finally the drafting and negotiation by lawyers on both sides of numerous legal documents to evidence the investment.
Personal collateral requirements depend on the loan amount and the project. Does the coffee franchise involve commercial real estate or will the business be leasing a space? Collateral can be in different forms. Real estate equity is one form of collateral. Cash (in the form of a payment reserve or a CD) is another. We would need to know the specific project cost breakdown to know what might be possible. Rule of thumb would be to plan on 25% personal equity into the business and the bank will finance 75%. If it is preferred to avoid putting a lien on personal real estate, plan to have 18 months of loan payments to set aside in an escrow account at the bank as a payment reserve. The payment reserve can be released back to you after 2 years, as long as the business is showing good cash flow and making the loan payments without a problem. The other option is a CD held at the bank for the term of the loan. The CD is usually a smaller amount of funds than the payment reserve but is held for the entire term of the loan.
To get a good estimate of costs, the first thing we recommend doing is asking the franchisor for their Franchise Disclosure Document (FDD) early on in the process. It’s a good idea to have an accountant and lawyer review the FDD with you before you sign any paperwork or hand over any money. A franchisor is legally required to give you the FDD at least 14 days before you buy a franchise.
Use your retirement accounts (401(k) or IRA) to invest in your business without having to pay early withdrawal penalties or taxes.  If you still need more money, this can be used in combination with a SBA loan.  The investment into your business may be enough that no collateral is required.  Even if collateral would normally be required, an alternative such as a payment reserve and be utilized.  Learn more about 401K business financing.
Instagram stories have been growing in popularity and now attract 300 million daily users. Instagram stories enable you to share a number of videos and photos and they appear like a slideshow. Instagram stories are only available for 24 hours. Instagram stories cater to mobile phone users who want engaging and informative content in as little time as possible. Used correctly, this format of Instagram videos and photos can help to drive engagement for your business. For example, the retailer, J.Crew, used Instagram stories to give followers a sneak peek at its pre-sale items.
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!
Franchise businesses serve as the backbone of the restaurant and retail industry. A successful franchise often starts as a small local business that catches the eye of savvy investors. Starbucks, McDonald’s, Walmart and Whole Foods are just a few of the many corporations that started as small mom-and-pop operations and were later franchised into nationwide networks.

There are many financing options for your franchise, but making the right choice is critical to your success. ApplePie understands the complexity and time constraints that you face in securing capital. That's why we’ve created a transformative lending network to suit your financial needs, maximizing flexibility and reducing the headaches and inefficiency of working separately across individual lenders.  
For existing franchises looking for working capital, another form of alternative financing comes from monetizing the franchise’s balance sheet to obtain funding. Using the franchise’s commercial real estate, or by tapping into the franchise owner’s personal real estate, an asset based lender can collateralize the real estate and provide working capital up to 90% of the real estate’s equity.
I usually don’t provide referrals, but in this particular case it is definitely warranted. Karen jumped through hoops with multiple alternatives until we came up with a solution that provided what we needed. At one time i thought we were at a dead end, but learned that Karen continued to pound away until the right solution surfaced. If you need someone to assist up front with your SBA loan, Karen is a perfect choice.

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.


Shelton recommends meeting with a loan officer a few weeks to a month ahead of time to personally meet the loan officer and find out if the bank is currently interested in lending the type of loan you are looking for: “You want the loan officer to be on your side,” Shelton explains, because the loan officer usually doesn’t have the approval level to say yes to a loan.

3. Leverage social media. Let’s face it, everyone is on social media these days, and the majority of traffic still occurs on Facebook. If you are not using Facebook for your business, create a page today. You are leaving an opportunity on the table if you don’t. There has been a shift the past few years with more and more retirees joining the social media world. I guess they realize that if they want to keep up with their kids, grandkids, friends and neighbors, they better get with the program. In fact, retirees are often my best brand ambassadors and help promote our events.
Microlenders: If your company is especially small, you may need to opt for a microlender. These are non-profits that typically lend short-term loans of less than $35,000. They also have a much higher APR than bank loans but may be useful by helping you bridge a temporary cash-flow gap. Microlenders require detailed business plans and financial statements, so be prepared for some serious paperwork.
As with other small businesses, finding financing for a new franchise can be one of the biggest challenges owners face. Some financing options are unique to franchises, such as franchisor discounts on fees and online financing companies that cater to franchises. General business financing options such as traditional and Small Business Administration loans are also available to franchisees.
Jeff White is a staff writer and financial analyst at Fit Small Business, specializing in Small Business Finance. As a JD/MBA, he has spent the majority of his career either operating small businesses (in the retail and management consulting spaces) or helping them through M&A transactions. When he is not helping small businesses, he spends his time teaching his five kids how to become entrepreneurs.

Starting a business involves a lot of moving factors, but the most important one is financing. You are going to need to spend some time evaluating your business model and writing your business plan before you can really determine the type of loan you need and the best way to secure that loan. As your business grows, your lending needs will change, so take the time now to understand the differences between lending and investing so you can be ready when your company starts to grow and needs to adjust its financing.

We make money when you get the funding you need. Some of the loan providers on our site pay us a referral fee when customers get approved for a loan. We always try to find the best option for you, even if we don’t have a paying relationship with a lender. We also turn down offers from lenders that we feel take advantage of small-business owners. Read more about how we make money.
2. You can do it because there is a business appropriate for just about everyone’s interests, experience, passions or expertise. “Starting a business” really only comes down to figuring out your business idea, doing your paperwork, and sorting out the money. Given the number of funding resources available today, you shouldn’t have too much of a problem getting that initial startup cash, especially if you focus on a lean business model or MVP route to market.
A franchise merchant cash advance (MCA) is a short-term loan that provides capital to franchises that need funding quickly. Approval for a merchant cash advance can take a matter of minutes, and funding can be completed in as little as 24-48 hours. Merchant cash advances work by having a funding company purchase a portion of your franchise’s future receivables at a discount, with an upfront payment to the franchise. After funding the funding company will then collect repayment by splitting each days credit card batches with the franchise.

You should approach small-business-loan shopping just as you would shopping for a car, says Suzanne Darden, a business consultant at the Alabama Small Business Development Center. Once you determine which type of lender and financing vehicle are right for you, compare two or three similar options based on annual percentage rate (total borrowing cost) and terms. Of the loans you qualify for, choose the one with the lowest APR, as long as you are able to handle the loan’s regular payments.
×