Securing Business Capital Funding to Start a Franchise

Starting a franchise is a great option for people who want to become small business owners. A lot of the work is done for you already – such as developing products, establishing a brand, etc. However, one big obstacle still remains, and that’s securing business capital or funding necessary to finance and start the franchise. You need some initial business capital available in order to afford purchasing a franchise. If you’re looking to do this, here are a few options. 

Check with Your Franchisor

First, you should check with the company you’ll be getting your franchise from. In many cases the franchisor will have options in place for new franchise owners to help them afford it. The franchisor does better when you succeed, so it’s in their best interest to help you get started on the right foot. Set up a time to discuss with them your options and see what they have available. If they don’t have any funding options that you like, or if they don’t have any funding options at all, you can try out one of the other strategies mentioned below. 

Secure a Small Business Loan

Another popular option for first-time franchise owners is securing a small business loan. You can do this either from your bank, from a local credit union, or even online lenders. With a small business loan, you agree upon an initial sum to borrow, then pay back that loan over time plus interest. Small business loans are very popular – according to the Small Business Administration, over $600 billion is given out each year. It’s a great way to get initial funding, provided you can afford to make the payments each month going forward. 

If you decide to go with a small business loan, you should take the time to explore your loan options. Talk to a few different banks or credit unions and see which one can give you the best deal. If you just go with the first bank you talk to, you could wind up with a high interest rate and repaying it will be difficult. 

Ask Friends and Family

A great source for securing business capital or funding for your franchise is your friends and family. These people are invested in your success and may be able to help you financially so you can achieve your goals. Obviously, your connections won’t be able to help you if they are struggling financially themselves, so this option isn’t available to everyone. In addition, financial arrangements can put a strain on relationships, so you should tread lightly if you’re going to go this route. If you do decide to ask your friends and family for funding help, it’s a good idea to spell out exactly what the arrangement is, including the loan amount and the repayment options, so that each side knows what to expect. 

Your Own Savings

Finally, in some cases you may be able to finance a franchise with just your own savings. This depends on the costs of the franchise along with how much of your savings you’re willing to invest. There’s an old saying that you shouldn’t invest more than you’re willing to lose. So, if you’re just a few years away from retirement, you probably shouldn’t invest your entire retirement fund into this franchise, as there’s always the chance it won’t succeed. Take stock of your own situation, then decide how much you’re able to invest in a franchise.

Formulate Your Plan of Action

Whichever method you decide to go with, you’ll need a detailed plan of action. Whether you’re asking for money from a bank, or your friends, or someplace else, they’ll want to see that you’ve thought this through. Take time to research every aspect of running this franchise, including things like hiring decisions, competition, the costs to rent a space, and more. By the end you should know everything there is to know about running that franchise. 

Starting your own franchise isn’t always easy, but it’s often worth it. It’s a great way to become your own boss, with a lot of the leg work done for you. The key is securing business capital to start the franchise. The options mentioned above should give you a starting point for getting the right funding.