Getting a franchise loan can be a complex and daunting process. To help, we’ve broken it down into five digestible steps. Refer to our comprehensive guide on how to get a business loan for more in-depth information.
1. Research the franchise
If you know which franchise you’d like to start, research the company to understand the franchise fee and general startup costs that are required. Network with other franchisees who’ve successfully opened a franchise under that parent company to learn how they secured funding.
At this point, you can also determine if the franchise:
- Offers its own direct financing (or partners with specific lenders to offer financing)
- Is already registered with the SBA, which could increase your chances of qualifying for an SBA loan
Pro Tip: If you are open to many franchise options, specifically research franchises with lower franchise fees and startup costs. This can improve your chances of getting funding.
2. Review your finances
Once you know which franchise you’d like to open, review your own finances to see if you’re currently in a strong enough financial position to do so. You may want to work with an accountant to get a handle on your net worth, liquid funds and credit score.
3. Research financing options
Start with the franchise itself to see what financing it offers and if you qualify. We always recommend researching SBA loans as well as franchise financing through banks, credit unions and online lenders so you have a clear picture of the rates and terms you can qualify for.
4. Assemble a business plan
Assuming you meet the general requirements for approval, build a business plan that demonstrates how you’ll turn a profit and why you’re the right person for the job. Check to see if your preferred lender has specific guidelines for crafting a business plan.
You’ll need a lot of business know-how to launch a franchise, so this is good practice. But if this part of the process is overwhelming, consult with a marketing professional or business consultant who can help you build your case.
5. Apply with a lender
The lender you choose will have a thorough process for you to follow when applying, either online or in person. This step involves a lot of paperwork, including:
- The business plan you’ve already built
- Recent tax returns (for you and your business, if applicable)
- Recent bank statements (for you and your business, if applicable)
- Franchise agreement