Franchise Financing for New Franchisees

Judy Jandro, SVP of Small Business Lending

One of the most difficult parts of starting a business is getting it off the ground. A franchise provides an opportunity to buy into an existing business model that has a proven track record, a successful training program, a solid supply chain, and expert technical support. Some of the best-known franchises have impressive success rates, lowering the risks that normally accompany entrepreneurship.

Buying a franchise business involves forming a business relationship to essentially pay for a license to sell a company’s products. One company, known as the franchisor, sells the right to use its business name, brand, and products to another party, known as the franchisee. Fees, such as a franchise fee, and royalty and advertising fees are typically paid by the franchisee to the franchisor.

The biggest benefit of buying a franchise is that you start off with a framework for success. The franchisor has developed a system that can make it much easier to turn a profit than if you were to start from scratch. It’s important to understand that owning and operating a franchise may also involve observing rules about how to operate your franchise, so you may have to sacrifice some control, but the risk of failure tends to be smaller.

Finding financing for franchising can be difficult, especially for new, up and coming franchises. Buying a business franchise often requires a significant capital investment which many people do not have the personal resources to fund. Like any business loan, franchise financing begins with making a loan application.

Franchise financing can come from a variety of sources, and the exact mechanics of how borrowing and repayment work vary by loan type. The type of loan that will work best for your franchise will vary depending on your specific needs. For example, the needs of a start-up franchise, which might include the need for funding to purchase the franchise and make it operational, are much different than the needs of an established franchise that may be seeking funding to use as working capital.

Potential sources of franchise financing include financing directly from the franchisor, tapping into your retirement fund, borrowing from family and friends or a Small Business Administration 7(a) loan.

Why Choose Small Business Administration 7(a) Financing?

An SBA-guaranteed loan helps to level the playing field; SBA 7(a) loans generally have more attractive rates and fees. With the needs of a small business in mind, SBA offers several different types of loans that offer lower down payments, flexible overhead requirements and flexible collateral requirements.

Why Choose a Community Reinvestment Fund, USA (CRF) SBA 7(a) Loan?

As one of only three nonprofit small business lending companies in the U.S. authorized by the SBA, CRF has supported the growth of small businesses in the communities that need it the most for more than 30 years. We offer SBA 7(a) loans, the SBA’s most common loan program. Long-term health and success of small businesses is important to CRF, so our approach is lending with sustainability in mind. We get to know our clients and seek to help nurture growth in their communities. We invest in clients who are confident can impact their communities positively.

CRF is ready to work with you to finance your franchise. Get started by providing us with an idea of your financing needs, and we’ll contact you within two business days. Work with a loan provider who cares about your business as much as you do – let’s get in touch!

All loans subject to credit approval.


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