However, despite the tendency of commercial banks to favor franchise businesses, you are still subject to the bank's underwriting and lending policies. The bank still has to review your net worth and credit history to determine whether you can pay back the loan advanced to your business. In some cases, you may also have to provide collateral to secure your business loan. 
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.
Bank loans are a great option, but before you go that route, make sure you’ve done your market research and can demonstrate that your business will do well in your area. If you haven’t had any luck getting loans from traditional lenders, look for a lender that offers SBA-backed loans, since they’re geared specifically to the needs of small businesses and are only open to those who can’t get funding elsewhere. Other financial options include online alternative lenders, which may be less restrictive in who they approve, but also tend to charge higher fees and rates.
Fees and costs. Origination, underwriting and early repayment fees are typical costs that you could see. If a lender provides an APR, it includes the interest rate plus any upfront fees. Early repayment can be a conditional fee and is not reflected in the APR, so it’s a good idea to carefully read through the terms of your offer before accepting it. Learn more about business loan costs.

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.
We designed this workshop to help you, a new business owner, understand and meet your federal tax obligations. This workshop is constructed so that the first three lessons... What You Need to Know about Federal Taxes and Your New Business, What You Need to Know about Schedule C and Other Small Business Taxes and Tax Forms; And How to File and Pay Your Taxes Electronically are for everyone, no matter what kind of business you have or whether you have employees.
Starting a small business doesn't have to require a lot of money, but it will involve some initial investment as well as the ability to cover ongoing expenses before you are turning a profit. Put together a spreadsheet that estimates the one-time startup costs for your business (licenses and permits, equipment, legal fees, insurance, branding, market research, inventory, trademarking, grand opening events, property leases, etc.), as well as what you anticipate you will need to keep your business running for at least 12 months (rent, utilities, marketing and advertising, production, supplies, travel expenses, employee salaries, your own salary, etc.).
Oral agreements often lead to misunderstandings. If you plan to hire a prospective employee, use a carefully drafted offer letter, which the employee should be encouraged to review carefully before signing. For senior executives, a more detailed employment agreement often makes sense. A good offer letter or employment agreement will address the following key items:
The MBDA does not directly loan money, but it does provide resources for members of minority groups who are trying to start a business. They have business centers around the country where entrepreneurs can seek mentorship and guidance as they start their business. These business centers are located in areas with a high amount of minority-owned businesses. You can go to MBDA.gov/businesscenters to find one in your area where you will be advised on everything from writing a business plan so you can apply for funding to marketing your business.
If you have a newer franchise or need capital ASAP, OnDeck (see our review) is one of the easiest and quickest ways to get a short-term loan or line of credit. Though OnDeck isn’t specifically geared toward franchise owners, it’s a viable online loan option for any type of small business owner that doesn’t qualify for a bank loan or doesn’t want to wait months to receive loan funds. OnDeck also recently partnered with the Franchise Council of Australia in an effort to better serve the global franchise market (fun fact: Australia actually has more franchise outlets per capita than America).

Broadly, there are two types of loans: secured and unsecured. There are dozens of types of loans depending on their nature, purpose, applicability, loan amount, interest and terms but they can all be classified as either secured or unsecured. Secured loans require collateral. It is a tangible asset that acts as the security. Unsecured loans don’t need such collateral or any security.


Guidant is our recommended ROBS provider. Guidant has helped over 10,000 businesses and facilitated over $3 billion in small business financing since 2003. They are also the only ROBS firm we know of which guarantees access to outside independent counsel during the ROBS setup process, which can help you objectively evaluate if ROBS is a good decision for the franchise you are buying.

But even if you’re not an internet startup or these techniques don’t feel right to you, you can still take steps to get money coming in quickly. If you run a service-based business, you can structure contracts so that clients have to pay a certain amount up front or at agreed milestones, instead of all at the end. With long-running projects, this can make a big difference to your cash flow. You can also offer special discounts and limited-time offers for people who sign up as early customers.

However, despite the tendency of commercial banks to favor franchise businesses, you are still subject to the bank's underwriting and lending policies. The bank still has to review your net worth and credit history to determine whether you can pay back the loan advanced to your business. In some cases, you may also have to provide collateral to secure your business loan. 

There are infinite sources of financing available to help you launch the franchise of your dreams. However, operating a franchise with no reserves and blinding yourself to unexpected business problems can lead to disaster. A good rule to remember: Never invest more than 75 percent of your cash reserves. If you have $10,000, invest $7,500. If you have $25,000, invest $18,750.
For-profit lenders are reluctant to issue loans to anyone who does not have a strong credit report and financial history. That is not the case with government small business loans. Obviously, a decent credit report is important, and you will have to follow the guidelines regarding the repayment period and the interest rate set by the government, but usually the interest rates charged by government loans are lower than those you could expect in the private sector.
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