Owning and operating a franchise is one of the most lucrative forms of commercial real estate that you can get into. With that said the costs of doing so are commensurately high, and finding franchise financing is one of the more difficult endeavors you can undertake due to the higher risk to the lender. It takes a lot of capital to get going, which is why we aim to make it easier with the list of viable funding options below.
The Federal Financing Options
Under the Small Business Administration, the federal government offers, quite possibly, the best options out there under the SBA 7(a) and the SBA 504/CDC loans. The loan amounts are truly impressive, and can reach $5 million with terms spanning from 10 to 25 years at an interest rate based on your credit score – usually between 7% and 9.5%, since you have to have a very good one to even qualify for franchise financing from the SBA.
The above terms were for the SBA 7(a); for the SBA 504/CDC loans, which are specifically for real estate and similar fixed assets, you can secure up to $30 million with term lengths of 10-25 years. The interest rates span 4% to 7%, making them markedly better than even the SBA 7(a) variant. To qualify for either, your business financials must satiate the requirements, whereupon you’ll be listed in the Franchise Directory and can thereafter petition for federal funding.
Franchise Financing With Alternative Lending
If you cannot qualify for the federal loans, then there are plenty of alternative loans available for franchise funding. You can’t expect the same interest rates, but most of them are certainly manageable.
Apple Pie Capital: They offer up to $100,000 for refinancing and similar actions, as well as up to $150,000 by way of equipment loans. Usually, these amounts are only enough to help with financing a preexisting franchise – and not start a new one.
OnDeck Capital: They are experts in short-term loans, and offer anywhere from $5,000 to $500,000 to those with moderately good credit scores. The terms lengths range from three to 36 months, however, which means large monthly payments. Your interest rate depends on your credit score and physical assets as collateral.
For more financing options for starting and/or maintaining a franchise, check us out at Capital Finance Partners – our experts have a collective century of experience in all matters of finance as pertains to business and personal finance.