Funding a franchise is never a difficult task. The difficult part generally comes in figuring out exactly how to finance the franchise for the lowest rates and best overall costs. While commercial banks will provide loans to business owners looking to buy a franchise, they have very strict lending requirements and will need a high credit score and plenty of proof that you can afford this investment.
Getting a business loan, even with good credit, is fairly rare. It’s hard to find a bank that will just hand out cash to a startup, but that isn’t the only option. Here are some tips to keep in mind.
Check with the SBA
The Small Business Administration offers a variety of lending options for startups and franchises. The organization has less risk since it is government-guaranteed and they work specifically with small businesses, so they know all the potential risks and other factors involved. You do still have to prove creditworthiness, but the requirements are much less stringent than other private loans.
If you’re a veteran looking to start a franchise, you can check into the Patriot Express program from the Department of Veterans Affairs. This program offers business loans to active-duty military members and their spouses for those who want to start a business. Plus, they offer the lowest interest rates of any SBA programs. There may also be the option to get approved without collateral here.
If a franchise won’t finance the investment for you or you can’t find an SBA loan that fits, you might need to consider other options for buying your franchise. If you have a 401(k) or retirement account, you may be able to use that to start a business. Just make sure that you do your research and consider the success rate of the franchise first so that you don’t compromise your entire financial future for the sake of starting a franchise.