Choosing the Right Business Loan for Your Low-Cost Franchise

Whether you’re brand new to lost-cost franchising or looking for new ways to inject capital for expansion after a few years in a GFG franchise, finding the right financing can really help you boost your business.

Before starting the application process, you’ll want to know how much money you need, what you need it for, how fast you need it, how quickly you’ll want to pay it back, and how much collateral you have. Thankfully, getting a loan for a franchise is often easier than getting funding for your own startup business.

Topics of Discussion

• SBA Loans
• Traditional Loans
• Other Low-Cost Franchise Funding Options

1. Small business administration loans are one of the most popular funding instruments for low-cost franchise owners like yourself. These loans are given out by banks, microlenders, and development organizations but are partially guaranteed by the federal government. The peace of mind these guarantees provides gives lenders more confidence and borrowers more flexibility. For as little as 10% down, you can get the capital you need to start or expand your business.

2. In some circumstances, you may be able to get a traditional loan from a bank if you don’t want to go through the SBA process. While traditional loans may have less red tape and lower interest rates, they often require a much larger down payment and significant collateral, usually between 20% and 30%. You’ll need to have assets like real estate, expensive equipment, or even your own home as collateral. It’s a good idea to have a lawyer look over the paperwork for a traditional loan before you sign anything.

3. Many franchisees decide to get funding for their operations outside the banks for a variety of reasons. Alternative funding methods can include borrowing from friends or family, home equity loans, and personal loans from private lenders. Some people even take money out of their retirement funds to start their franchise. All of these options have benefits as well as disadvantages. You’ll always want to weigh the risks of defaulting before getting into any agreement.

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Disclaimer: This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of or want to locate a franchise in one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your state. Franchise offerings are made by Franchise Disclosure Document only.