Start Up Financing for Franchises

Not all franchises make it easy to get financing. It is important for you evaluate the franchise agreement and franchise disclosure documents (FDD) in their entirety to ensure you are getting exactly what you expect. You may also want to look on the SBA website to see if the franchise is on their approved list. When a franchise is not on their approved list an attorney must review the franchise documents to qualify for SBA financing. This is normally an extra expense for you to obtain financing.

If you are pursuing more conventional options, you will want to make sure that the franchise has more than 50 locations in order to attract a national lender. Smaller franchises will need to obtain financing through smaller community banks or credit unions. Smaller franchises also seem to be financed through the SBA rather than conventional sources.

The rule to remember is this; not all franchises are equal to lenders. Although a franchise offers historical performance, management history and experience, not all of them carry the same brand equity as McDonald’s. Lenders know this and will give your franchise credit for what it’s brand and history is worth.

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