Funding Your Franchise

fundingAt Franchise Seekers as part of our consultation process one of the first questions we will ask is how do you plan on funding your franchise?

There are some good funding options out there and as a rule of thumb never invest more than 75 percent of your cash reserves. If you have $10,000, invest $7,500. If you have $25,000, invest $18,750.

More important, remember that the price of a franchise doesn’t always reflect the actual cost of the business or getting in to the business itself. Additional costs can include down payments on the land, building, equipment, fixtures and signs, and can cover inventory, leasehold improvements, training, opening promotional costs, administrative costs, insurance, and licenses. It is important that you do not under capitalize yourself.

Options include:

Conventional Loans

Conventional loans are usually limited to existing business owners seeking unit expansion, or new owners with very specific direct experience. In addition, lenders are looking for collateral in real estate that can be attached to mitigate their risk. Terms generally run five-10 years.

Self-Directed Retirement Plans

You may be able to use your 401k or IRA as your partner in your franchise. There are some specific requirements, and the process takes only a couple of weeks to complete. We can recommend expert funding sources that specialize in IRA, 401(k), 403(b), Keogh rollovers. Done correctly you can access the money in your retirement account to invest in your business with without taking a taxable distribution.


If your franchise has hard assets or equipment such as a vehicle, office machinery and so forth, leasing may be your best option. Rates and terms vary widely, so you need to conduct research on your equipment package, and the best way to finance it.

Direct Franchisor Financing

Most franchisors do not offer financing. Item 10 of the Franchise Disclosure Document will let you know if any is offered. If financing is available, it may not be at the best terms that you may qualify for on your own, so make sure that you do due diligence for yourself.

SBA Loans

Small Business Administration loans are one of the most common forms of financing for a franchise. These loans are designed to mitigate lenders risk by offering a guarantee on the principal of the loan from our federal government. If real estate is involved, the government actually funds a portion of the loan directly. SBA Express (7A) is one of the more popular options with loans up to $150,000 with a 10 year term.

ONLINE Funding Sources

Such as BoeFly online aggregators that take one application and submit it to many potential lenders.

Unsecured Business Lines of Credit

Revolving business lines of credit using your business TIN. A great way to establish credit in your business name and tax identification number.

Our funding sources have over 20 years of experience in franchise funding and they will be happy to provide you with a free consultation to discuss best options.