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Keep an eye on the future with seven ways to finance your franchise. And if you're still not sure where to get started, we break down the costs of dozens of top franchises across the US.
When you're looking to open your franchise or expand it, there are a handful of common ways to get funding:
Many franchisors have in-house financing for their franchisees. Franchisors typically specify how much you can borrow, the length of your repayment term and other conditions of your loan. Because there's no set standard, your exact loan options — if your franchisor offers loans at all — will vary greatly.
Your local bank or credit union may offer financing options, and national banks like Bank of America have franchise-specific loans available. However, you'll need to present a strong business plan and back your finances with experience to qualify for most bank loans.
If your franchisor is in the SBA franchise directory, you may be eligible for an SBA loan. The SBA 7(a) program allows you to use funds just like any term loan, but a large portion of your loan is backed by the federal government. The rates that you can potentially qualify for may make them worth the extra time and documents needed to apply.
You can use a resource like SmartBiz to find an SBA lender that could help your franchise secure funding.
There are lenders that specifically fund franchises. You can browse the Franchise Registry to connect with over 9,000 lenders.
While these avenues are generally thought of for unattached startups, you could obtain funding for franchising as well. Angel investors require surrendering a percentage of ownership to the person or people providing you financial assistance. But before you get involved with an investor, be clear what the terms are — and how it may impact your contract with your franchisor.
Like banks, there are online alternative lenders that lend to current and would-be franchise owners. Lenders like OnDeck and Funding Circle work with a wide variety of borrowers, including business owners with bad credit. This is often a faster approach to financing your business, but be cautious: Alternative lenders are typically more expensive than their bank counterparts.
Beyond a lender or investor, there are a few sources you could potentially tap in your personal life to fund your franchise, especially if you're just starting out.
To see business loans you could qualify for, select your desired loan amount, annual revenue, time in business and personal credit score range. Then click Show loans.
1 | McDonald’s | Fast food | $45,000 | $1 million–$2 million |
2 | Subway | Sandwich shop | $15,000 | $120,000–$260,000 |
3 | KFC | Fast food | $45,000 | $1 million–$2 million |
4 | Burger King | Fast food | $50,000 | $1.5 million–$3 million |
5 | Pizza Hut | Pizza shop and delivery | $25,000 | $300,000–$2 million |
6 | 7-Eleven | Convenience store | $25,000 | $200,000–$1.1 million |
7 | Wyndham Hotels and Resorts | Hotel | $150,500 | $40 million–$65 million |
8 | Hilton Hotels & Resorts | Hotel | $95,000 | $30 million–$110 million |
9 | Marriott International | Hotel | Varies by brand and number of rooms | $60 million–$100 million |
10 | Domino’s Pizza | Pizza shop and delivery | $25,000 | $140,000–$540,000 |
Now that you know your different routes to choose from, here’s what to keep an eye out for when weighing your options.
You’ve got your choices nailed down and you want to apply. Here are several things that most business lenders will ask for:
Opening up a franchise is a huge undertaking that takes no shortage of time and effort. Once you’ve done your homework to find a franchisor you want to work with, you’ll want to review your business loan options to get the ball rolling.
Check out our answers to common franchising questions.
The International Franchise Association is one of the most extensive sources of information on franchising out there. Aside from the IFA, the Small Business Administration offers a good deal of resources regarding franchising in general and financing specifically.
Yes. Depending on the franchisor, you could get the fee discounted or waived completely. You can also explore VA business loans and grants for additional financing options.
How much funding you can get varies greatly between franchisors. Some will provide funding for as much as 90% of the franchising fee while others will also offer financing for associated startup costs such as construction.
It depends on the type of financing you’re seeking and the lender. Financing can take anywhere from a few days to more than two months.
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