How to Get Financing for Your Franchising Business

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So you’ve found a good franchise that fits your personal needs but you lack funding, what now? Funding is one of the most important aspects to be a successfully operating business. Remember that the franchise fee is not the only thing to prepare for. You have to make sure you have enough working capital that could keep you going for the next 18 to 24 months. If you need help with funding, this article will discuss the 5 best options available to you. 

“Wherever you borrow your money from, you must make sure that you have a strong business plan for at least the first two years.”

Sources of Additional Funding:

Franchise Lending

Franchise lending is scarce, but should be on top of your mind. This is a method where franchisors directly help franchisees in their finances using exclusively tailored financing solution either through third-party lending institutions or banks.

Commercial Bank Loan

Commercial banks are the most common source of additional funding. By granting you a loan, the bank expects you to pay for the principal amount and interest by following a specified repayment term. The bank will consider your business plan, personal credit history, work background, and other financial factors before granting you a loan. CPAs can help you create good business plans, increasing the likelihood of a loan.

Small Business Administration Loan

It is a federal government-backed loan. Your chosen bank or financial institution will lend you additional fundin, but if you default, the bank is guaranteed to get 80% of the outstanding amount from the federal government. The downside of this approach is that it takes a very long time to get processed.

Alternative Lenders

Private lenders or organizations that offer loans at a higher interest rate than commercial banks. You’ll need someone financially capable to advise whether alternative lenders are ideal for your business.

Crowdfunding

A modern method of obtaining additional funding is crowdfunding. There are websites out there who can help with this, and as a last resort, you can also ask family and friends for help. You need to be creative with your business proposal to gain their help and draft contracts that specify repayment terms or conditions to avoid compromising relationships.

Conclusion

Getting adequate funding is a foundation of a good business. Make sure you have planned for contingencies and operational costs to keep you going regardless of what happens. Franchising is a fantastic investment, and securing a solid financing will help ensure success even further. 

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