The true cost of buying a franchise can be rather high, but there are many substantial sources of financing that can help you leap into the world of business ownership. You can get purchase financing in amounts up to $5 million—many third-party sources specialize in this type of financing.

Six of the Best Ways to Finance Your Franchise Business

Commercial bank loans. A traditional term loan from a bank is the most common way to finance your franchise. Banking institutions typically lend franchisees term loans that must be repaid, along with interest, over a given period. A franchisee could use this initial loan to establish their business and pay for startup costs, such as license and rent fees.

The franchisee needs to meet certain requirements before the commercial banks can provide such loans. Your bank will ask to review your personal credit history and business plan. You will need to provide these documents to the lender to determine your creditworthiness. Generally speaking, your financial status and credit score are better, the better your terms and interest rate.

Franchisor Financing. A potential franchisor should be your first point of contact if you need funding to purchase a franchise. New and existing franchisees can obtain financing for expanding their businesses through well-established programs. Franchisor financing gives you the benefit of purchasing every product you need from one place. Almost all of these companies will offer you financing for your franchise fee and your equipment and other startup resources.

Franchise financing agreements come with different terms, but some franchisors will assume up to 75 percent of a franchise owner’s debt burden. While some agreements require deferment of payments while the business is still in its formative stages, others offer sliding scales of repayment. Make sure you understand the terms of your franchise agreement and finance agreement before you sign them by having an independent business attorney or accountant look them over.

Small Business Administration Loans. Getting a franchise loan from the Small Business Administration (SBA) is another option. Compared to loans outside of the SBA structure, SBA loans often attract lower interest rates. Unlike banks, the SBA offers cheaper loans because the government backs them. Franchisees benefit from the availability of several SBA loan programs.

Crowdfunding. The idea of crowdfunding is becoming a more and more popular way to finance franchises. If you want to crowdfund your business or franchise, you could create your crowdfunding page and promote it. Also, there are specific organizations that specialize in crowdfunding. Consider crowdfunding when the interest rates and loans available to you are not satisfactory because of your financial history.

Cash. Cash financing allows franchisees to start their businesses on a clean slate without the burden of debt. However, even though this is a good option, it should be used with caution when operating a franchise network.

Alternative Lenders. When you need cash to launch your franchise fast or to supplement your SBA or commercial loan, alternative lending maybe your best option. Alternative lenders may offer faster turnaround times and have fewer requirements than traditional lenders.

There is a wide range of loan options available, from equipment financing to credit lines to term loans. While alternative loan products may be more convenient and easier to obtain, the charges are higher, the repayment terms are shorter, and the loan amounts are smaller than traditional loans. In any case, it may be worth considering if you need cash now to pursue a life-changing opportunity, can’t get a bank loan or SBA loan, or if you want to supplement your current financing.  

We Can Help

POM (Peace of Mind) Capital & Funding Services has helped hundreds of Entrepreneurs/borrowers in New York get the money they need with their Franchise Business loans. Our staff is highly trained and can help you get an Instant Business Loan.  

Are you behind on your bills? Are you tired of being turned down by other banks? Need an extra boost for your business? Maybe you’re trying to pay down your existing business debt or want to expand your business? Our team understands your needs and can assist you. Pre-qualify with our company today and get instant approval.

For Franchise Purchase Financing inquiries and other help, email POM (Peace of Mind) Capital & Funding Services at [email protected] or call us at (631) 354-9290 to find out which funding options will work best for your business.

POM Capital & Funding Services is a leading provider of alternative funding solutions for businesses of all types and sizes, offering commercial finance solutions and products to businesses in the Centerport, New York area and throughout the state of New York.