When you invest in a franchise, you are creating a business relationship in which you are paying for a license to sell their products. The arrangements are documented by a franchise agreement. Typically, there is a time limit on the arrangement, but it can be renewed when it does expire. There are lots of fees involved when you invest in a franchise: advertising fees, franchise fees, royalty fees, and more.

Finding a franchise opportunity can be challenging- but finding franchise funding can be an even bigger challenge. This type of investment typically requires a lot of capital, which most people don’t have ready access to.

In this blog, we’re going to look at some ways that you can find franchise funding to invest in your new business venture.

Where to Find Franchise Funding

Finding franchise funding is a lot like finding funding for any other business venture. It can be a headache. However, several options are specifically dedicated to this type of venture.

Franchisor

The first place to check for franchise funding should be the franchisor. Some companies help their new franchisees get started by waiving the franchise fee. They also may partner with lenders, such as banks, to help franchisees get the capital they need to get started.

If the franchisor does offer these options, it will be indicated on their website and in chapter ten of the franchise disclosure document. That being said, if the franchisor does offer to finance, be sure to compare their terms with terms from other available sources.

Franchise Finance Company

Some companies specialize in funding franchisees. They typically work to match the borrower with a lender that fits their financial needs. Some of these companies lend directly to the new franchisee.

Traditional Loans

If you have a decent credit score/history, you may be able to borrow from a traditional bank or credit union for your franchise funding. According to the SBA, franchisees are more likely to borrow from a traditional bank than any other type of new business owner. This is because franchises are usually well-established and are trusted by the lender than a new business that they don’t know anything about.

However, you will still be subject to the lending/underwriting policies of the bank. They will still review your credit history and net worth to determine whether or not you will pay back the loan. In some cases, you may have to produce collateral to secure the loan.

SBA Loans

The SBA is another option for franchise funding. They offer loans to new businesses as other lenders do. The most common one is the 7(a) loan. You can access SBA-backed loans through your lender.

Conclusion

If you are considering investing in a franchise and need help finding franchise funding, contact Toluca Lake Capital. We will be happy to help you find what you need and get you started on your journey as a new franchise owner.