Many Americans have a desire to own a piece of the American Dream, and one of the biggest of those dreams is owning your own business. The thought of being your own boss, being in control of your own destiny, and pursuing your own dreams and desires can be exciting. There's one roadblock that keeps many of those same Americans from pursuing their dream: financing. Not having the money to get into business for yourself can very quickly put a damper on your dreams. In this article, we're going to help you learn how to finance buying a franchise.
Franchise Financing Options
There really is hope for anyone who wants to know how to finance buying a franchise. One of the most obvious, of course, is finding a relative, friend, or a business partner who is willing to invest in you as well as the franchise you want to purchase. Unfortunately, not all of us have a friend or family member with the money sitting around to invest. In this case, an "angel investor" might be a good option. An angel investor is someone who is willing to provide capital for a franchise or business start-up, most often in exchange for convertible debt or ownership equity. An angel investor might be willing to lend financial support to start-ups during the early phases, when many other investors might shy away because of the risks involved.
A bank loan is another obvious option for financing a franchise. If you have good credit, a good business plan, and collateral, banks and other traditional lenders like to invest in commercial endeavors. A loan from the Small Business Administration (SBA) is another option. These loans are sponsored by the U.S. SBA, an independent government agency with the goal of providing Americans with tools, guidance, and support for starting and operating small businesses. The loan program is one of the best components of the agency, which uses intermediary lenders (mostly banks) as partners for giving small business loans. If the borrower defaults on the loan, the SBA guarantees most of the loan amount will be refunded to the lender. SBA loans are highly sought after because of their high capital amounts, low interest rates, and the term length of the loans. Unfortunately, there is a great deal of competition for these loans and the criteria for getting one is extensive. If you can qualify, an SBA loan is the ideal option, which can be applied for through your own bank or lender.
As mentioned above, banks and credit unions are a great way to finance any business, franchises included, and according to the SBA, a new franchise owner is 15% more likely than other types of business owners to use a loan from a commercial bank loan. The same source states that banks and other lenders are more likely to finance franchises. Why? Because the built-in recognition of a strong brand is more likely to be worthy of a loan than an unknown, untested business. It's as simple as that.
Franchisor funding is another great option if it is available. Some franchisors are willing to help finance new franchises, either by waiving fees or working with lenders to help franchisees obtain a loan. You can typically find out If a franchisor is willing to help finance a franchise by looking on the company website. You can also find it in Section 10 of the Franchise Disclosure Document.
If you are having trouble getting your franchise financed, you might want to think outside the box. One of the cool new "in" ways to finance just about anything is something called crowdfunding, whereby money is raised by soliciting the public. You can set up and promote crowdfunding pages online either through a personal website or by using websites that specialize in crowdfunding for franchises and other types of businesses. These types of crowdfunding efforts usually target the specific market your franchise will be catering to and offer prizes and perks to anyone who contributes. For instance, if you are opening a restaurant franchise that serves beer, you could offer anyone who contributes to your fund free beer for life. This is where you get really creative. Many successful endeavors have used crowdfunding, including filmmakers, musicians, business owners, etc. It's a great way to raise money when you can't use other options.
Let All USA Franchises Be Your Starting Place
At All USA Franchises, we are on a mission to bring you the largest database of franchises you'll find anywhere. Our goal is to list all 3000 plus franchise opportunities in the United States, providing a great place for investors, franchisors, and franchisees to come together. All USA Franchises is free for everybody. Since there are never any fees for a franchisor to list their franchise, potential investors and franchisees will have access to all of the available opportunities, not just to those franchises that have paid to be seen. This is what makes All USA Franchises stand out above the other franchise directories on the list. We also have a large selection of articles on our blog with many helpful topics for anyone who is looking to buy a franchise.
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