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5 Reasons Why Franchise Financing Is Smart

Posted On: April 23, 2018 author Paul Kendall

Are you looking for business ideas? Well, picking up a franchise will be a great place to start. Moreover, there are many franchise financing options to help you get the ball rolling.

 Conventional business necessitates that you come up with an idea for a product or service. You then need to write your business plan, workout out the cash flow, projections and make sure that you have the logistics of business in place before you face the questionnaires of the franchise equipment lenders.

On the other hand, picking up a franchise gives you the advantage of running with a business model that works and it is much easier to get franchise financing for your business.

 

Here are 5 reasons why franchise financing is a smart idea:

 

  1. Franchises Have a Higher Rate of Success

 

The business plans of franchises are time-tested and ready for you to hit the ground running. Once you have the franchise financing in place you have the advantage of leveraging on the work already done by the franchisor.

Since there is a set amount of brand-awareness at the get-go, you save a lot of money which otherwise would have been spent in marketing and getting your business name out in the community.

There is no room for a trial and error approach as there are set procedures that are followed to get the product as per specification or provide high-quality service, whichever the case may be. When applying for franchise financing, this is given considerable weight by the equipment lenders.

Moreover, if for any reason, there is a setback the franchisor provides a strong support system. This gives you the best of both worlds, the responsibility of being an independent business owner while at the same time receiving guidance to run your business.

 

  1. Commercial Banks Favor Businesses with Brand Names

 

While approving franchise financing, banks prefer franchises over start-ups because they tend to have a lower default rate since they have a proven track record of being successful business outlets.

The franchisor then has a vested interest in the success of your business and will follow through his commitments of training and support to ensure that you are getting a bang for your buck after you have successfully secured franchise financing.

 

  1. Established Operation Guidelines Help to Secure an Accurate Amount of Money

 

Becoming a franchise gives you the advantage of applying for the accurate franchise financing amount. The franchisor will lay out all the expenses required for rental, inventory, supply, resources and even the royalty fee. This removes the guesswork of doing the math yourself. Another added advantage of taking up a franchise is that there are no hidden costs, unexpected overheads or sudden setbacks out the blue since everything is jotted down in black and white by the franchisor. Moreover, in many cases, the franchisor will also help you set targets for your business outlet and steps on how to repay the franchise financing that you have secured.

 

  1. Business Expansion Is Easier with Franchises

 

Another reason that franchise financing is smart is due to the fact that the franchisor has his reputation on the line. No doubt as a businessman you have to put in the hard work, but the franchisor is mainly looking to add stores to their basic business model. This is the key to their success as well. This makes them as good as your business partner. 

With this strong support system, you are on your way to success. Of course, that is easier said than done. But, the point here is that as a business person you are now able to think of expanding your business. Once you have the experience of running one franchisee outlet successfully you can leverage on that success and open additional stores.

Now that you already have the credibility of running the first franchisee store successfully it makes it easier for you to get franchise financing for the next one, and the next one.

 

  1. Lower Down Payments Help the Budget

 

When you lease franchise equipment it comes with many advantages to make it friendly for your pocket. One of them is low down payment on equipment leases. As a franchise, you are required to open up a store, pay rental leases for the property as well as the equipment infrastructure. With franchise equipment financing, you can avail equipment leasing options that have low down payments.

Another key factor to make your business run smoothly and to ensure that it gets over all the initial roadblocks is the fact that finances are taken care of and are never a hindrance to the optimal functioning of your business.

Franchise equipment leasing can also be approved with flexible payment plans. So, what does this mean to your business? You can now get franchise equipment financing for your business and could agree to start repaying the equipment loan 90 days after you receive all your equipment. As vague as this may sound since the franchisor is experienced with his business model, he can help you set the exact terms of repayment for your approved franchise financing.

Using an SBA Loan for Franchise Financing

Many franchises are approved by Small Business Administration (SBA) and are also eligible for 7(a) loans. These loans once processed, can be used for all of the franchise related activities. This includes franchise fee, lease rentals, equipment purchase, costs related to inventory and even for hiring employees.

There are a couple of different options for you to get funding for your franchise. You could avail Rollover for Business Startup(ROBS) from your retirement account without early withdrawal penalties. There is also the option of seeking crowdfunding financing, home equity line of credit or through friends and family.

You could always approach an equipment financing company for part or all of your franchise financing. Make sure that you have well researched the business model of the franchisor. You also need to have a Franchise Disclosure Document (FDD) that has listed detailed information regarding your franchisor and the performance history of their business. An equipment leasing company will primarily want to see this first before approving your franchise financing.


Final thoughts on 5 Reasons Why Franchise Financing Is Smart

Franchise financing is a great way to achieve business success due to franchise success rates, brand name recognition, operation guidelines, streamlined business expansion, and reduced down payments when you finance franchise equipment. Trust Capital can assist you in franchise equipment financing to help your franchise get started or expand today!

 To schedule a meeting with a Franchise Loan specialist call Toll Free at 866-458-4777

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