If you’re looking to buy a franchise and you want get help with financing the purchase, you might want to look for franchises that offer financing. With credit markets tight and with traditional lending at a standstill, being able to afford a franchise might come down to the franchisor and their financing options.
There are basically three options that franchises can offer financing to prospective buyers. They are partial financing, discounting, and third party sources.
Partial financing options are when franchisors will finance a portion of the franchise fee or other set fees. For example, if a particular franchise has a franchise fee of $40K, they may offer financing to those who put down half, $20K, and they will finance the balance.
Discounting is not traditional financing, but certainly helps alleviate the initial costs of buying a franchise. Some franchises, in an effort to attract buyers, are offering discounts. Whether a reduced franchise fee or multiple territory discounts, franchise companies are looking for ways to attract buyers. This might be the time to get a deal.
Finally, third party financing is an option that uses preferred vendors of the franchisor to help streamline the lending process. This option does not lower the lending requirements or standards for the borrower; it simply makes it streamlined for the lending process. This is because the lenders are familiar with the franchise system and understand the risks. One of the largest third party lending programs is the SBA Registry.
The SBA Registry is comprised of SBA approved franchises that meet the guidelines of the Small Business Administration. By being part of the SBA Registry, a franchise can help direct its potential investors to SBA lenders.
Whether you need to work with franchises that offer financing or not, please consult with a FranFinders expert franchise consultant.
