Complete Guide to Franchise Finance and Loan Options

You’re in luck – U.S. franchises were expected to grow to more than 785,000, with overall GDP projected to be near $500 billion, according to the International Franchise Association. 

The top 5 states for growth include Texas, Colorado, Arkansas, Florida and Idaho. Tennessee, Georgia, North and South Carolina and Nevada aren’t far behind.

Even if you’re not located in one of those states, though, revenue might be down or business expenses may be on the rise. Free up working capital or hold tight to business savings, and consider which franchise finance or loan option is right for you.

Pay Franchise Fees

While franchises can be profitable businesses, there are dues you’ll always be responsible for, typically monthly. Royalties and franchise marketing fees factor as a percentage of your revenues, of which royalties are the most costly.

Depending on your specific industry, royalties can range from 4%-12% or higher, according to the U.S. Small Business Administration. These fees are apart from the upfront, one-time franchise fee you pay upon buy-in.

Purchase Inventory

While your franchise may not require much inventory to operate, some do. Think of restaurants and convenience stores, your local Dunkin’ Donuts, Subway, Domino’s or 7-Eleven. If you’re looking to buy stock in bulk or just need funds to cover this month’s purchase order, a franchise business loan could help.

Buy New Equipment

Whether restaurant cooking stations or professional gym equipment, there may be a time when your franchise location needs an upgrade. Pieces become outdated. Others break down. Whatever the case, new equipment comes with a cost. That said, equipment financing can help you purchase or lease the machinery you need to maintain the status quo.

Maintain Your Lease

Having a space to operate is essential to running a brick-and-mortar business, but some months bring in more sales than others. When rent comes due, what can you do? 

If your annual lease runs $50,000, you’ll need to come up with nearly $4,200 for a single month’s rent, not to mention the costs to keep the lights on as well as other essential utilities. That’s where a franchise loan can assist.

This isn’t a far-off figure, either. A recent Houston Chronicle article looked at a restaurant’s lease space in terms of a percentage of revenue. According to the post, oftentimes, restaurant leases are 5%-8% of total revenues.

Cover Payroll

Without staff, you can’t function. They, as well as your customers, are the lifeblood of your business. Whether you just don’t have enough to cover the salary for a new hire, or you need funding to get through a financially challenging time, franchise financing lenders can provide you with information on loan products for which you might qualify.

When unexpected business needs arise, here are a few franchise finance options to consider.

Business Line of Credit

When you have ongoing business expenses, you need a flexible financing solution. A business line of credit offers that. Like a credit card, you’re approved for a certain amount you can use when you need it. Or not use it. That’s up to you. As you pay down your balance, your credit line replenishes, up to your original approval amount.

Business Term Loan

A business term loan is a one-time loan that can be used for virtually any need your franchise has. Depending on the lender, term loans can have repayment terms of 1-5 years or more.

Equipment Financing

Get the funds you need to pay for costly equipment or machinery for your franchise business. With equipment financing, you could be approved for up to 100% of the purchase price of the item you need. That’s because, in many cases, the equipment serves as collateral for your loan.

SBA Loan

If you’ve been denied a conventional bank loan, consider an SBA loan for your franchise business. These loans offer competitive interest rates and repayment terms. SBA loans are offered by lenders but partially guaranteed by the U.S. Small Business Administration (SBA), so they are seen as less of a risk.

Working Capital Loan

When sales are temporarily down, working capital loans can offer financing to tide you over as you look to get from one month to the next until things pick up. As such, working capital loans are meant to cover short-term expenses.

Merchant Cash Advance

An alternative financing option available to many small business owners is a merchant cash advance. Funding is fast, and the amount you qualify for is based on your projected revenue. Typically, this type of financing requires daily payments, usually automatically deducted from your business bank account.

Of course, you might initially think of a bank franchise loan when you need funding for your business. While bank loans offer competitive rates and terms, they’re often slow to approve and fund applicants. What’s more, the requirements to qualify are often difficult to meet. 

Today, there are other options. Alternative lenders are known for streamlined applications and fast business financing, including franchise funding. Their requirements aren’t as stringent, which means greater access for more business owners in need of capital. Terms are typically shorter, payments are usually more frequent and rates are higher. 

That said, with Fast Capital 360, you can seek financing with franchise loan rates starting at 6.25% for SBA loans and 7% for business term loans. Find a franchise business loan calculator to estimate your payments and borrowing costs.

Whether you’re wondering how to get a franchise loan with bad credit or you’re seeking an SBA loan for your franchise, we can help. You can apply for franchise funding with the following:

Minimum Requirements:   

• 500+ FICO score
• 6 months in business
• Annual revenue of $100,000 

What You’ll Need to Get Started:

• Basic information about your business and yourself 
• 6 most recent monthly bank statements

Getting a loan for a franchise business doesn’t have to be difficult. Here’s what you can expect from us:

Quick and Easy Application

In just a few minutes, complete a simple online application.

Multiple Offers

Get in front of our nationwide network of lending partners with 1 application. Have more offers come your way.

Expert Advice 

Speak to one of our experienced Business Advisors to review your financing options. They’re on hand to help you make the best financing decision for your franchise.