Starting in business by investing in a franchise provides you with the opportunity to learn from established professionals while enjoying the benefits of an established brand with a known customer base and identity. It’s a great idea if you’re considering a career as an entrepreneur or as a single investment to diversify your income without the work needed to establish a new brand identity. It does come with some expenses, though, which means you need to not only have the money for supplies, equipment, and working capital, but also for royalties and a license fee. For many, the key to making this commitment accessible is financing. So, how do you get franchise funding? It all starts with an assessment of your own credit.
Review Your Resources
Traditional lenders and alternative sources of financing will both ask for your financial information, and since you’re starting a company but you don’t have one yet, that means your personal credit report will come into play. They will also look at your source of income and available assets, the length of time you’ve been at your job, and other factors in your financial history to assess the kind of risk a franchise loan to you presents them. Organizing that information not only helps you fill out application packages more quickly, it also helps you understand your options for financing. Often, lenders have minimum income or credit requirements posted, as well as their loan LTV numbers for each product. As you compare options, rule out the franchise funding resources that either require more than you have for working capital or for any other aspect of your portfolio.
Think Big, Look at Alternative Lenders
Another key to getting financing is to think about alternatives to traditional bank loans. Many franchises offer financing themselves for new investors, and using them as a point of comparison can help you by showing you something you can use for comparison. In some cases, it could even be your best fit option. SBA loans are another place to check out, because the right franchise investment may qualify as a new business acquisition under the 7a program. There are also dedicated franchise financing lenders with programs designed to put working capital in your hands so you can meet your expenses and launch. Often, these represent the most cost-effective investment for new owners without experience in the franchise world, because many offer easy to understand fixed rates and long terms that keep your monthly overhead costs managed so you can get to a return faster. Keep them in mind as you look for franchise funding.