Franchise Financing-Things You Need To Know

Most of us at some point of time must have thought about running our own business. With that thought in mind, you probably spend your nights dreaming about crafting a perfect business plan with opening balances,3 years of projected cash flow, loan paying off and what not. Buying a Franchise may be the best option for those dreaming of having their own business and being their own boss , as the wannabe franchisee is actually buying an established business that is successful; thus, substantially lowering the risk of failures as compared to those who start fresh ventures of their own.

Though franchises may look like a short cut to finding success, don’t forget that ensuring a profitable business might be hard task without the right financing. That’s where franchise financing comes in scene. Business folks often use the term ‘Key to success’ – the key to success in case of franchise is to timely finance it. So what then is this franchise financing. It is the process through which specialist franchise loan agencies address the exact financial needs of a franchise industry. Once you have decided on your franchise option and done your initial homework, the only question left to be answered is how you are going to pay for it? Here’s what you need to know if you are looking for franchise financing

You need a business plan to start with

None of the financial institutions will lend you money without getting an outline of what you plan to do with it. Therefore constructing a business plan which will satisfy the lenders criteria is most important. You can take the help of your franchisor in developing a plan.

Fill out the application thoroughly

Lending is all about paperwork. Therefore if you do not want your financing request to be declined, get your important papers ready and handy.

Don’t get greedy

Overstating your expenses in a hope to have some reserve for covering unforeseen expenses can prove to be the biggest obstacle between you and your franchise dream. Your loan should cover only the amount that you need to run the business.

Tell them how you’ll pay them back

Financial institutions like to know when and how the money will return to the bank and this is one thing which many tend to ignore. Therefore preparing the expense sheet and extrapolating the repayment dates is very important for earning your lenders approval.

Some potential franchise financing sources include the following:

  • Personal savings and investments
  • Borrowing from friends and family members
  • Taking out a small business loan from a local bank or credit union
  • Obtaining a second mortgage on your home
  • Working with outside investors or investment capital firms
  • Obtaining a loan from the U.S. Small Business Administration (SBA)

Getting financing for your franchise is your gateway to becoming your own boss. Becoming familiar with the financing process for franchises will help you become prepared for the road ahead – the road toward self employment! To know more on how to finance a franchise, visit

About the Author(Article Source:
Nick Bentley is an expert in credit functions who also likes to write many interesting articles and blogs, helping people to understand these concepts and take sound finance decisions. He recommends if you wish to understand how to finance a franchise.


In : Loans

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