Loan for Franchise up to $600,000
We’ve helped many companies with franchise funding with amounts up to $600,000. Check how much you can get by completing our simple online application. Apply now and enjoy no fees, impacts to your credit score, or obligations.
Buying into an existing franchise can be quite expensive and often requires some form of outside financing to solidify the deal. There are a variety of loan for franchise financing options available to help those interested in becoming franchise owners bring their vision to life.
Opening a franchise business can give aspiring entrepreneurs the best of both worlds – a chance to start and operate their own company without the headache of figuring it all out themselves. An existing franchise essentially provides new small business owners with a blueprint for success. Validated product and service offerings, public brand recognition, existing operating procedures, and design elements all provide added benefit over forming a brand new company.
What Is A Franchise Loan?
A franchise loan is similar to other small business loans used to fund company operations with borrowed money. Franchise loans are installment loans typically obtained from a commercial bank or the SBA franchise program and have interest rates and terms that vary depending on business credit score, personal credit history, availability of collateral, and requested amount for funding.
How Does Franchise Financing Work?
Franchise financing opportunities work the same way as other business financing options, with the exception of franchisor funding. In some cases, the franchisor will offer deals and discounts for a new franchise owner who agrees to use a preferred lender or partner company.
After an application for franchise financing is approved, funds are dispensed by a lender to the borrower in one lump sum payment. The borrower then pays the lender in fixed monthly payments for the duration of the loan term. Payments include the principal amount plus added interest and fees.
All payment activity is reported to business credit bureau agencies to document the company’s ability to manage outstanding debt and finances.
Financing Options to Start A Franchise Business
Financing options for franchise opportunities will vary depending on a business owner’s individual needs and circumstances.
Some franchisors help aspiring franchisee business owners acquire financing through lender partners, discounts, or fee waivers. If special financing incentives are available, they are usually listed in Section 10 of the franchise disclosure document. This can be found on the franchise parent company’s website.
Merchant cash advances are less challenging to qualify for than conventional loans. Even though they are not loans, they can give business owners access to significant amounts of cash relatively quickly.
A merchant cash advance is a type of lending where a franchisee borrows money from their future earnings. Lender payments are automatically debited from the business’s bank account and are calculated based on a percentage of daily or weekly sales. The amount of payments changes according to sales volume and revenue.
Traditional installment term loans from banks and credit unions often have the favorable rates and terms but can be very competitive and challenging to qualify for. Standard eligibility criteria for most conventional lending institutions include a minimum of two years in business, strong financial statements, a personal credit score of 720+, and availability of collateral. New business owners and those without a documented business history may have difficulty getting approved for a traditional installment term loan.
An SBA loan is a special type of installment loan obtained through a bank or credit union that has a large percentage of its funds guaranteed by the Small Business Administration (SBA). If a borrower’s account goes into default, the SBA will cover 50-90% of the bank’s debt, depending on SBA loan type. Because of the guarantee, the risk to lenders is very low. While SBA loans tend to have the lowest interest rate, it can be challenging to qualify for an SBA loan. SBA (7)a loans can be utilized for general expenses, while SBA 504 loans are typically used for real estate purchases.
Angel investing is an alternative financing solution that may offer more flexibility for franchise owners. Many investment opportunities require a small business owner to give up a percentage of company ownership in exchange for funding. Unfortunately, when you give up a piece of company ownership, you may also give up the ability to make autonomous decisions.
Crowdfunding allows business owners to raise money from public investors through many small amounts (ranging from $100-$10,000) while still maintaining 100% ownership and control of the company. Money is usually raised through an internet campaign and can be very successful from financial and public awareness standpoints.
Short term loans are also available to small business owners. These typically offer financing terms up to a year. The application process for these is very similar to regular term bank loans. Using a short term loan can help finance a franchise startup costs if you’re able to qualify. It’s important to note that short term loan programs typically can’t be used to purchase real estate.
How To Apply for a Business Loan for Franchise Financing
Applying for a business loan to start a franchise can be tedious with lengthy application processes. Before you begin, make sure you do your research ahead of time to avoid any unwelcome surprises.
Confirm Eligibility
Once you decide which type of business loan to apply for, it’s essential to understand lender eligibility requirements to see if you qualify for franchise financing. Most banks and credit unions require the same criteria as an industry-standard: a minimum of two years in business, a personal credit score of 670+, a good business credit profile, strong financial statements, and availability of collateral to secure the loan.
Ensuring you meet a lender’s initial application criteria will give you a solid starting point before moving on to the next step.
Gather Required Documents
Documents required for business loan applications include business and personal tax returns, business and personal bank statements, business financial statements, formal business plan, and any legal documents – commercial leases, franchise agreements, articles of organization. Gathering these in advance may help the application process go much more smoothly.
How to Apply for the Best Franchise Funding
Eligibility Requirements
To be approved by MCashAdvance™, you must meet the following requirements:
- Only U.S. citizens and legal residents are eligible
- You must be at least 18 years old
- Your business must be at least six months old
- Credit scores of 500 or higher are required
Funding Limits
Depending on your company’s financial health, you may be eligible for funding up to $600,000.
Term Length
The repayment period typically ranges from 1 to 5 years. Amounts funded and sales volume will affect the repayment period.
Pros and Cons for Using a Loan for Franchise Financing
Advantages of Franchise Loans
Lower Interest Rates: Among all financing options available for franchise opportunities, loans often have the lowest interest rates with the best terms.
Funds From a Bank Loan Have Unrestricted Use: Once funds are released from the lender to the borrower, the borrower may allocate the money to whichever needs are most important for business operations. A bank’s only concern is that they get repaid in full and on time.
The Business Owner Keeps All Profits: Investors are ready and willing to loan large amounts of cash to startup businesses and franchise opportunities but only in exchange for a piece of ownership and profits. Any profits earned due to bank loan funds stay with the company.
Disadvantages of Franchise Loans
A Small Business Term Loan Can Be Difficult to Qualify For: Eligibility for term loans varies based on the lender. Industry-standard suggests having at least two years in business, good credit scores (both business and personal), solid financial statements, availability of collateral, valid reason for borrowing, and meeting minimum income requirements.
You Might Not Get Approved For the Full Amount Needed: In some instances, lenders will approve the loan application but with different terms than the borrower requested. A common occurrence is receiving an offer for an amount of money far less than what a business owner applied for. Traditional lenders approve loan amounts based on what they think you need, not what you actually may need.
Other Industries We Finance
Franchise Loan Frequently Asked Questions
Yes. Various financing options are available to help business owners fund a franchise opportunity or receive working capital using a business loan or alternative borrowing options.
The best type of business loan for opening a franchise will depend on many factors. Individual needs and circumstances like credit history, time in industry, availability of collateral, and amount of money required will help determine which type of loan will best fit your business venture.
The amount of funding you can receive for a franchise loan depends on many factors. Typical approval amounts an range from a few thousand dollars to several million dollars, depending on the lender and type of loan requested.
Traditional loans generally take between 7 and 14 business days to process after receiving notification that your application was approved. The SBA loan approval process is notoriously slow, with processing times often becoming several weeks or months. Merchant cash advances can be funded by the next business day once approved.
Franchise loans are incredibly competitive and often require credit scores of at least 670+ to qualify. If you have bad credit or a credit history that is too thin, alternative lenders and merchant cash advances may offer a more suitable option to fund your franchise business.
Funding Your Business Is Our Business
Franchise Loans in Summary
New franchise opportunities can be very lucrative but costly to buy into. The best franchise loan options will depend on individual needs, franchise agreements, and circumstances.
If you do not meet the criteria for traditional lending, online lenders, crowdfunding, and merchant cash advances can provide fast, valuable alternatives to help get your business up and running.
Find The Best Payment Processing For Franchises
As part of your initial franchise setup, you will usually be provided with a payment processing system. Franchise owned payment processing systems often charge high credit card processing fees. As a franchisee, you are often allowed to change the default payment processor provided by the franchise to an alternate payment processor. Many franchisees are not unaware of this option. mCashAdvance™ can help franchise owners eliminate payment processing fees. We offer small business credit card processing with no fees. Switch up your payment processor today.
Does Your Business Need Funding Today?
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$5,000 – $1,000,000
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