Do you know what is like running a business under the name of a big corporation? It becomes possible when you decide to open a franchise, an ideal opportunity for entrepreneurs willing to take a risk. It eliminates the need for excessive promotions to create brand awareness because people already know the big names.
Unfortunately, opening a franchise is not a piece of cake. You have to pinch pennies for massive investment to buy the franchise and pay for all the royalty expenses. After all, you would enjoy the name of the well-reputed brand. Usually, people are struggling with finances when it comes to opening a franchise since no one has enough savings.
So, how about you look for financing options? Here are the six best financing options for franchising a business.
1. FINANCING FROM FRANCHISOR
Before anything else, you need to bother the franchisor for funding. It is widespread, and many franchisors do provide secure lending options or capital to open the franchise. Sometimes, they also offer partnerships to fill the capital gaps, enabling investment from two parties. All these funding options can work in your favor, making everything easier for you.
If you qualify for franchisor financing, they will hold the bag for providing everything. It covers up all expenses from purchasing equipment, finding a location, and other resources you need to start the business. Hence, hunt for franchisors that are offering their funding programs to keep everything in line. Also, you would have to sign an agreement which would state all repayments with terms and conditions.
2. LINE OF CREDITS
You can hunt for a line of credit for small business owners to fund franchise expenses. Head over to a bank or credit union nearby, discuss your plan, and see what they have to offer. Usually, banks are willing to lend money for opening a franchise to promote entrepreneurs. These lines of credits give the flexibility to borrow as much money as you need below the limit.
These lines of credits give leverage to businesses. It is up to them how much money they like to withdraw because they only have to pay interest on the borrowed amount. Thus, it closes doors for all overwhelming interest payments too. Alongside this, it also comes with an option of reborrowing. You can also determine how long you want the credit line to remain open with mutual agreement from the banks.
3. ALTERNATIVE LENDING OPTIONS
It is the option when nothing else seems possible. These lenders are specifically for financing franchises to boost growth in the economy. You can check different banks or companies to fulfill small financing needs, especially for funding expenses of the franchise. Similarly, there are many more lenders in the market too.
Are you wondering how they are different? Well, alternative lenders are offering convenient procedures, less paperwork, and quick loan approvals, allowing you to kick off the venture quickly. Unlike traditional bank loans, where it takes hours to read the requirements section, these lenders have shorter loan requirements too.
So, don’t mind digging into these options before you make your mind for anything. However, pull of research to get the hang of it. These lenders are willing to give finances in return for high-interest rates. You can go for these lending options if you think the franchise can take the burden of high-interest payments.
4. TRADITIONAL BANK LOANS
It is the first thing that comes in everyone’s mind when talked about loans. Commercial bank loans are the most feasible option for any sort of financing. You can use these loans for franchise financing too. Usually, banks are offering low-interest rates with likely repayments and a standard procedure. Hence, people find these loans super convenient.
The procedure might seem long since you don’t have a running business already. Therefore, you have to pitch your whole idea of buying a franchise in detail to the bank. Alongside this, you would present projected financial statements and budgets for the upcoming project. All commercial banks want to gain an insight into how things would work and whether you can repay them in the future or not.
Unfortunately, they might ask for collateral too. It means you have to put your house or any other valuable property as a security for the loan. Banks ask for it because in case you become insolvent, they would cover their losses by the collateral. Don’t worry, if you have the potential and passion for working hard, your franchise will reach heights, overcoming all loans.
5. LOOK FOR CROWDFUNDING
Can you be creative while asking for funding? Well, crowdfunding demands some level of creativity when seeking funds. As the name suggests, here you find funds from the crowd. There are many websites available for this purpose and organizations offering to crowdfund. You can begin by signing up for any of the sites and fill up the requirements.
Alongside pitching in your idea, you have to make a video that tells people about your business. Work on building a connection with the crowd, tell them your story. Open up about your franchise and how you are bringing a massive brand to their city or country. Also, you can give them a virtual tour of your franchise through a video.
Besides, to attract more people, you have to offer them something in return. You can set a criterion of reward depending on the level of funding. It is not necessary to go out of the blue – you can offer them introductory discounts in your franchise. If not discounts, offer them a small gift on their purchase to encourage them to give funding. Believe it or not, but these things work.
Even though opening a franchise is difficult due to financial constraints. The availability of countless financing options is allowing people to step forward. Besides, you should always consider opening franchises of companies that are known globally. Similarly, it is essential to evaluate to see what the franchise holds for you. Look above to see the best financing options for franchising a business.
John James is a content writer for Learn To Trade, the foreign exchange education and learning specialists – offering a range of training courses to help people understand the currency trading market, as well as its opportunities and risks.