Best Franchise Loans of 2022 – Forbes Advisor
As there are several Types of Business Loans, Business owners have several options when deciding to invest in franchise financing. However, some types of financing are better suited for first-time franchisees, while others are best suited for those trying to grow their existing franchise business or who need help with operating expenses.
These are some of the most popular ways to fund a franchise:
1. Online Business Loans
Online Business Loans are term loans that prospective borrowers can apply for online without having to go to a stationary bank. Alternative lenders offer a streamlined application process that can be completed online. Loans are generally available for amounts up to $500,000 or more, and like traditional business loans, borrowers receive a lump sum payout.
While online business loans can be an excellent way to fund a franchise’s growth, they may be less accessible to startups and first-time business owners. Prospective borrowers trying to acquire their first franchise may have difficulty meeting the minimum business tenure and annual income requirements of some lenders.
2. Business Credit Lines
lines of credit Provide borrowers with access to cash on demand up to a set credit limit. Business credit lines range from $2,000 to $250,000 with interest rates ranging from 10% to 99%. Interest accrues only on the outstanding balance, and borrowers can pay off their balance and reuse their line of credit until the end of the drawing period, which is usually between 12 and 24 months.
Business owners can use their entire line of credit to fund a franchise, but this form of funding is best for ongoing operating expenses. Lines of credit are also well-suited to experienced franchisors looking to expand ongoing operations, rather than first-time franchisees who may not qualify.
3. SBA loan
The SBA offers small business owners a wide variety of loans, including their popular ones 7(a) Loan Program. Loan amounts are up to $5 million and the funds can be used for most business purposes, including buying a franchise. However, SBA loans involve a somewhat lengthy application and approval process and may not be appropriate for borrowers who need quick access to cash.
4. From the Franchisor
Some franchisors streamline the financing process by helping new franchisees obtain credit and offering a discount on fees. However, this offer is franchise specific and not all potential business owners are eligible for assistance. Visit the company’s franchise website to see if it offers financing and review the franchise disclosure document for relevant financing information.