Financing for Franchises

Obtaining a commercial loan for a franchise can be tricky. Well known franchises are easier to finance because of the track record and history they have established. The franchisees who are looking to expand are great candidates for financing if their existing locations are performing well.

Careful strategy should be taken in consideration when expanding an existing franchise. Debt can position your business for future growth or deter financing in the future if done incorrectly. It is important to grow at the right pace in order to maintain an appropriate equity position in the company. Your franchisor will encourage you to grow as fast as possible. This can be a delicate conversation and may be part of your franchise agreement.

Be cautious who you choose as a lender. Many finance companies exist that solely issue loans to franchises. While these companies are very good at getting deals closed they often do not offer the most competitive rates or terms. Business owners can pay a 2% interest rate premium if they are not careful. Don’t be fooled. Make sure you do some due diligence before committing with the easy road for financing.

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