Financing a business is similar to building a foundation for your property; the robustness of the option you choose will determine whether or not the structure can stand once it’s completed. Without the right financial backing, you will soon be beset by financial overruns. To get you off to a good start, consider the following options for financing a franchise:
1. The Federal Government Option: SBA Loans
This is easily one of the most attractive mechanisms for financing a franchise; not only can you borrow up to $5 million – but you have the US government as your guarantor. Of course, your credit score needs to be very good to qualify, and your business has to have shown some promise before you should apply. Approval can be difficult to come by otherwise, since the SBA dramatically reduces the risk and has many approved lenders to provide the funds.
2. Why Not Try the Franchisor
Although the SBA is a more robust option, it is harder to secure the funds that it may be with the franchisor, herself. Companies such as McDonald’s, Starbucks, Gold’s Gym and the United Parcel Service are well-known for offering their franchisees financial aid if they can demonstrate the ability to maintain stores that carry their namesake. More than any other option, the franchisor, itself, is set up to provide everything the franchisee would need financially – even including business advice.
3. Do-It-Yourself: Crowdfunding
This is more of a DIY than the others, but of course you will need the help of an aggregate platform that has access to the streams of investors that you will need. This is the best option for those who – for whatever reason – want to eschew bank lending, SBA loans or other alternatives. Although you can create your own website for this purpose, you’d find that to be tough going to get traction without the marketing funds for search engine optimization (SEO).
Another benefit is that there are crowdfunding platforms that are hyper-specific to the industry in which your product/service can gain the greatest traction. If it’s a good idea with something demonstrable, the crowd of prospective investors already exists – you just need to find them.
The other options re of the more conventional fare: bank loans, loans from friends and family, and alternative loans. If you need help on where to get started, consider dropping us a line at Triport.