Franchise Business Loan

A franchise is a business that is independently owned by a third party but is associated with a larger corporation who uses the third party to expand their business. Franchise owners get to use the business name, which in many cases can be nationally known. In turn, royalties and a fee are paid to the corporation or owner. The franchiser is the company that grants the independent party the use of their trademark and products. They may also offer assistance with marketing and help teach the franchisee how to properly run the business.

A franchise business loan is for the purpose of buying a franchise. It is like any other type of loan in that the borrower must repay the lender the principal and interest rate. You may hear this type of loan also referred to as a small business loan. In addition to traditional lenders like banks and credit unions, you may want to think about using the Small Business Administration (SBA) for your franchise loan. This is a federal agency who encourages small businesses to improve the economy. They have special programs that traditional lenders do not offer.

You will find it more difficult to get a franchise business loan from a bank, credit union or other lending institution. One reason is because of the down payment, which can be as high as 40 percent. Your credit rating is also extremely important, and you will be required to give collateral which in this case could be something like the title to your home. You will also need a business plan, which is a report that outlines what kind of business you will have, how it will be run, how it will be advertised, how you plan to make it profitable and how you plan to repay your loan through business profits. There is a high failure rate for small businesses which is why traditional lenders view them as high risk. However to some lenders a franchise is looked at a little differently.

The Small Business Administration is likely your best bet, but they still have requirements that must be met. Your credit should be good, but credit is not the only thing the administration looks at when approving franchise business loans. If you do have bad credit, collateral may be required for an SBA loan as well, and you will still need a detailed business plan. One thing you may not need for one of these loans is experience running a business, especially since you should be provided with training and assistance from the company selling the franchise to you. The company wants you to succeed because if you make money, they make money. When seeking a franchise to buy look for one with a company that provides plenty of support for the franchisee.

There are requirements for the franchise also when it comes to getting a loan from the SBA. for example, the franchise must be located in the U.S. and have less than $13.5 million in sales. So when weighing your options, you may find that the Small Business Administration is your best bet. They have all kinds of loan programs and counseling programs to encourage new businesses. Also, franchises can become very popular especially if you are buying a franchise from a nationally known company. You can find out about franchise opportunities that are available by researching online, or even by checking with local businesses you are interested in to find out if they are franchises or corporately owned. Whether you want to run a restaurant, clothing store, convenience store or other type of business there is an ideal franchise for you.