How to Buy a Franchise with Alternative Financing
Buying a franchise can be an excellent way to start a business without having to start from scratch. However, not everyone has the necessary funds to buy a franchise outright. This is where alternative financing comes into play. In this blog post, we will discuss how to buy a franchise with alternative financing.
First Things First: SBA Financing
Before we dive into alternative financing options, it's essential to check if the franchise you're interested in is on the approved list of the Small Business Administration (SBA). The SBA is a federal agency that provides loans, loan guarantees, and other forms of financing to small businesses.
If the franchise you're interested in is on the approved list, you may qualify for an SBA 7A loan. This type of loan provides up to $5 million to small businesses for a variety of purposes, including franchise fees and startup costs.
Alternative Financing Options
Suppose the franchise you're interested in is not on the approved list of the SBA. In that case, you can consider alternative financing options such as unsecured term loans and equipment financing.
Unsecured Term Loans
An unsecured term loan is a loan that doesn't require collateral. Instead, the lender looks at your credit score, income, and other factors to determine your creditworthiness. If you have good credit (730 or higher) and a W-2 job, you may qualify for an unsecured term loan.
With an unsecured term loan, you can borrow anywhere from $50,000 to $200,000, depending on your creditworthiness. You can use this loan to pay for the franchise fee and some of your working capital.
Equipment Financing
If the franchise you're interested in requires a van, you can finance it through equipment financing. Equipment financing is a loan that you can use to purchase equipment, including vehicles. With equipment financing, you can borrow up to 100% of the cost of the van.
Layering Financing Facets
If you don't have a retirement account, you can still secure financing for your franchise by layering financing facets. This means using different types of financing to fund your franchise. For example, you can use an unsecured term loan to pay for the franchise fee and working capital and equipment financing to finance the van.
Book a Call to Discuss Your Specifics
Every financing scenario is different, and what works for one person may not work for another. If you're interested in buying a franchise with alternative financing, we recommend booking a call to discuss your specifics. During this call, we can help you come up with a financing plan that works for you.
Conclusion
Buying a franchise can be an excellent way to start a business, but it can be expensive. If you don't have the necessary funds, you can consider alternative financing options such as unsecured term loans and equipment financing. By layering financing facets, you can secure the financing you need to start your franchise. Remember to check if the franchise you're interested in is on the approved list of the SBA before exploring alternative financing options.