Financing Options for Franchise Owners

Posted Dec 01, 2011 at 03:08pm By Sara Mackey

Category: For Beginners

There are quite a few different types of financing options for owners of franchised businesses. Just as a solid business plan is necessary, so is a sound financial strategy. Explore the different financing options available, shop around for the best terms and interest rates and do not be hesitant to ask successful franchisers how they got started. Take the time to learn from the best and all the secrets to success they may have.

Financing Options for Franchise Owners

Franchise Financing Options:

Home Equity Loans

If you own your home and have a considerable amount of equity, this may be a good option for you. Lending institutions are generally more willing to lend the capital required when there is collateral on the line. As there is more personal risk involved, all risks and benefits should be analyzed before considering this avenue of financing.

Silent Partner or Investor

Many franchisers have the skill, energy and motivation to survive, they just lack the cash needed to start. If this is you, it may be to your advantage to take on a silent partner or venture capitalist to secure your finances. Consider all terms you are willing to acquiesce and how much involvement you would want them to have.

Conventional Lenders

Banks are and continue to be the prime source of business capital. Approval requirements have grown increasingly stringent as the economy continues to recess, so this option is really only suitable for franchise owners with pristine credit, sufficient collateral, enough cash on hand and the patience and time needed to wait for a long, drawn-out approval process.

Merchant Cash Advance- Small Business Loans

Merchant cash advances are a great option for small businesses and franchises alike. Based on future transactions rather than past credit history or present capital, merchant cash advance loans can secure the capital you need. These types of loans are based off of future credit or debit card sales with a predetermined percentage of each transaction going to pay back the loan. This is a viable option for owners with less than perfect credit and those with a significant amount of credit card sales.

Alternative Lending Institutes

As bank loan approval requirements continue to be harder to obtain, independent loan brokers have begun to fill the need for financing. Although there interest rates may be higher, but there is still capital available for those that need it. Be sure to understand and know all terms and repayment requirements before obtaining this type of financing, this will ensure there are no unpleasant surprises down the road.

You can secure the finances needed for your franchise or small businesses by taking the time to explore all available options before signing on the dotted line.

Sara Mackey is a marketing director and senior editor at Connexx.com, a website that helps bring entrepreneurs and the financing they need together. Connexx has been an authority on the internet since 1998 and has the tools and experience needed to supply financing to any small business

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