Financing Options When Buying a Franchise Business
Many questions come to mind when you think about investing in a new business, one of the big ones is, “how will I pay for this?” What people don’t know is there are financing options available to you when you decide to join a franchise business. According to FranchiseInsights.com “75.2% of entrepreneurs are concerned about getting adequate access to funding.” These options are most commonly offered through third-party vendors specializing in franchise loans. Finding the right option for you to become a business owner through financing can be simple.
Why use financing to start your business?
Having financing and a line of credit are key to running a successful business. Financing your franchise business allows you to keep your liquid cash available as working capital. Establishing and securing credit lines is usually necessary to work with product suppliers and vendors. Choosing to finance via a loan verse self-financing can be beneficial for tax purposes too. Keep in mind, as whole costs are going up and inflation is up the highest it has been in over 30 years resulting in increased cost of doing business including startup costs for opening your doors. The franchisor wants you to succeed and will help guide you to resources and help review your options.
Franchise Funding Options
Once you have identified your desired timeline to decide on buying a franchise you will then need to decide how you will pay for it. Although paying full cash is always an option, you will more than likely need to secure the funds from an outside source. To get financing you need to work with a bank or broker. Here are the top three ways that people receive financing for franchising but there are others out there.
- SBA backed Loan – great choice for first time business owners, typically a lower down payment required, reduces risk, and enables easier access to capital by helping you find a lender via Lender Match
- Conventional Loan – best option for experienced business owners and for multi-unit investors, typically a faster turnaround than SBA loan
- Self-financing / Other options – Using 401K/IRA or seeking an investment partner
Ways to qualify and when to receive financing
The sooner you start to line up financing for your new business the faster you will be able to purchase and open your new business. The franchisor may or may not have relationships with lenders that can help you secure financing. You should start researching your options early in the process, this may be before you even decide on which franchise you will ultimately purchase. Working with a third-party expert in franchise lending will give you more options and accelerate your success.
Common steps to get approved
- Verify liquidity and net worth
- Complete your market research and competitive analysis to determine which franchise to buy
- Write a business plan
- Estimate your startup costs
- Establish business credit
- Identify financial projects and how the loan will be used
- Apply for loan
Partners with Wayback Burgers
Boefly is a preferred vendor of Wayback Burgers with over 10 years of experience on franchise financing. They serve as a marketplace for you to find brokers and lenders that best suit your wants and needs to allow you to achieve your business goals. Whichever way you decide to finance your franchise opportunity, it is important that you research all the alternatives.
To learn more about franchising opportunities with Wayback Burgers, get started today.