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How to Finance a Franchise and Secure a Business Loan

Guest post by: Jocelyn Chavez

Article Overview: Contrary to popular belief, you don’t have to be flush with funds to achieve your business ownership goals. With a wide-range of traditional financing programs and non-traditional financing options available, going from an aspiring entrepreneur to becoming your own boss, is a realistic and attainable pursuit. Choosing to invest in an established franchise or business concept makes it easier to secure financing because franchises feature established business systems and a proven track record- key elements that traditional and non-traditional lenders consider when evaluating a loan applicant.

How to Finance a Franchise and Secure a Business Loan

Contrary to popular belief, you don't have to be flush with funds to achieve your business ownership goals. With a wide-range of traditional financing programs and non-traditional financing options available, going from an aspiring entrepreneur to becoming your own boss, is a realistic and attainable pursuit. Choosing to invest in an established franchise or business concept makes it easier to secure financing because franchises feature established business systems and a proven track record- key elements that traditional and non-traditional lenders consider when evaluating a loan applicant.

Funding Your Dream

If the idea of running your own business and being your own boss fills you with excitement and anticipation, but the thought of navigating the loan process elicits dread, you may be interested in learning about the numerous financing options that exist, including:

• Financing Programs from the Franchisor- Many franchisors offer programs that help franchisees gain access to the necessary capital to purchase and launch a franchise. The financing assistance that franchise companies offer varies depending on the organization. Some franchise companies provide direct financing through an in-house lending program, while other organizations offer third party financing programs through preferred lenders that they have established relationships with.

• Small Business Administration (SBA) Approved Franchises- The SBA is an independent agency of the federal government that helps Americans start, build and grow businesses. While the SBA does not offer loans or financing, directly, it does offer SBA-guaranteed loan programs, through lending institutions. There are a variety of SBA-approved franchises available; and since the SBA guarantees a portion of the loan, choosing to own an SBA-approved franchise typically expedites and streamlines the loan process.

The significant advantages that SBA-backed loans feature make them a popular choice among current and aspiring business owners. In fact, the SBA supported a record-high $1.95 billion in business loans, the week of December 18 to 24, 2010, the highest dollar volume since the SBA began tracking its weekly loan volumes. The SBA also plays a powerful role in the overall economy by fostering growth. Between September 27 and December 31, 2010, the SBA approved more than $10.3 billion in loan guarantees, supporting more than $12 in lending to small businesses and entrepreneurs across the country.

• Commercial Bank Loans- Large national lending institutions, local banks and credit unions offer commercial loans. Once you have determined the franchise that you'd like to purchase and prepared your business plan, contact banks and lending institutions, regarding the commercial financing options that they offer.
• Home Equity Loans- Securing a home equity line of credit or a second mortgage can provide a source for funding a franchise.
• Investing Your 401K or Retirement Savings- There are many programs available that enable you to roll your 401K or other retirement savings into a business loan.
• Personal Loans from Family and Friends- If you choose to approach friends or family members regarding a personal loan to fund your franchise, be sure to provide them with your business plan, just as you would with any prospective lender.
• Angel Investors- Angel investors often have extensive business experience and will provide business loans in exchange for an equity position, or director advisory role in the company, or franchise.

Just as the various franchise opportunities that are available allow you to expand your professional horizons, the numerous financing options that exist open up a world of possibilities. Being well-informed about the various financing options that are available, arms you with the information you need to make an educated decision and choose the franchise that's right for you.

To learn more about your financing options, inquire to companies offering financing to qualified individuals and for additional articles regarding: securing financing, the advantages of choosing an SBA-approved franchise, and financing options amid a challenging economy, please visit Franchise Solutions' online business directory to discover the franchises and financing options that are right for you.

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Article Tags: business loan, business loans, business ownership, financing a franchise, financing options, financing programs, franchise financing, franchise loans, franchises, funding a franchise, how to secure a loannontraditional lenders, loan applicant, sbaapproved franchises



Related Forum Posts
These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business - Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.


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