Looking for a jumpstart on your future as a franchise owner? Financing options are available but there are many to choose from. How do you know if you should finance your franchise? How do you know how you should finance your franchise? There are many options, but here are the most common ones that are pursued.
Talk to the Franchisor
Many franchisors help people wanting to buy a franchise with financing options. Even if you don’t plan to finance through the franchisor themselves (and many times you won’t), the franchisor can be instrumental in helping you get fees waived and partner with you to get loans from the bank.
Not all franchisors offer funding, however. Before you settle in on which franchise you plan to buy anticipating that they’ll offer funding, check out their website and their Franchise Disclosure Document. Here you’ll find more details about what’s available to you that you can then use to compare to other financing options on the market.
Talk to Your Bank
Banks are one of the most traditional sources for financing for people who are interested in starting any kind of business. Franchises are no different.
When you meet with your bank to get a traditional loan be sure to go in armed with as much information as possible. Bring with you any industry statistics, franchise-specific sales figures, and anything else that can help you demonstrate that you’ve done your research and are confident in this franchise as being a viable business. Banks want to see this information to determine the level of confidence they can have in giving you a loan. Even though you’re financing a franchise, you’ll still be subjected to all of the bank’s underwriting requirements and policies.
Friends and Family
Sometimes, friends or family might be in a financially rich position to be able to support you as you start your path into franchise ownership. Although these types of relationships are nice on the surface, they can become riddled with problems if not handled properly. Be sure you’re still putting your agreement into writing before you shake your friend or family member’s hand, and commit to sticking to it until your loan is paid off. Not doing so could cost you a valuable relationship down the road.
Canadian Small Business Financing Program
The Canadian small business financing program offers loans to franchisees that are looking to buy a franchise. This program is especially beneficial for anyone who worries about their ability to get a traditional loan from a bank. Because the government shares the risk with the lender, it’s easier to obtain this kind of loan.
It’s important to note that with this loan, certain costs are ineligible, including labour, business vehicles, and money for renovations on leased property by a tenant. Loans go up to $1,000,000.
Which Option is Right For You?
There are many options for financing your franchise. The right one depends on your personal circumstances. Talk about this with your franchisor, a franchise consulting company, or with your closest family members before deciding on one to pursue.
Susan Guillory is the President of Egg Marketing & Communications, a marketing firm specializing in content writing and social media management. She’s written three business books, including How to Get More Customers With Press Releases, and frequently blogs about small business and marketing on sites including Forbes, AllBusiness, The Marketing Eggspert Blog, and Tweak Your Biz. Follow her on Twitter @eggmarketing.