One of the biggest challenges an entrepreneur can face is finding funding to open a restaurant franchise. There are several financing options that are unique to restaurant franchises, including franchisors and online financing firms that focus their efforts on working with franchises. Then there are more general business financing operations, such as the Small Business Administration which offers loans. So what are the differences between each option and which can work best for you?
Partnering with Franchisors:
A franchisors pain purpose is to work with prospective franchise owners to finance restaurants, by waiving fees to get advantageous loans. Companies that offer to fund franchises will list the program on their websites, as well as in Section 10 of the Franchise Disclosure Documents. You can find the best deal by comparing the terms of each franchisor’s financing plan against other franchisors and other funding options.
Using a franchise financing company:
There are many companies that specialize in restaurant franchise financing. These companies work to match borrowers and lenders or lend directly. Some examples of brands funded by franchise financing company include Great Clips and Dunkin’ Donuts franchisees.
Some credit unions and banks are financing all sorts of businesses and included amongst that number are restaurant franchises. In fact, first-time franchise owners are around 15% more likely than the average new business owners to utilize a commercial bank loan. These lenders are often more likely to finance franchises with a recognizable brand and a record of success. But, if you choose to go through the traditional process you will have to go through the bank’s lending policies and underwriting standards, which means the financial entity will examine your credit history and net worth. Banks will likely also require you to supply collateral no matter what brand you are opening your business under. It is known that it’s more difficult to qualify for a bank loan for a new franchise business.
Under this variety of loans, the SBA (Small Business Administration) guarantees a collection of loan products that credit unions, banks, and other lenders commonly provide. In these cases, franchisees are able to apply for SBA loans through their lender. Many companies, such as Papa John’s Pizza, Ace Hardware, and Yogurtland, are listed on the SBA’s franchise registry. Typically applying for an SBA loan to open a franchise for a brand on the list is faster because the SBA has previously reviewed these companies and the particulars of their franchise agreements.
We make restaurant franchise financing simple
Our restaurant franchise financing specialists will walk you through every step and structure a lease or loan that can have you up and running in no time. We offer a quick approval time and up to 7 years term length, making sure your business has the most time to succeed without drowning in debt. We offer franchise owners an easy way to get franchise financing for business success. To find out more about restaurant franchise financing, contact the experts at IRH Capital today.