The best franchise loans of 2022 – Forbes Advisor

Just as there are several of them types of business loans, business owners have several options when choosing franchise financing. That said, some types of financing are more suitable for first-time franchisees, while others are best for those trying to expand their existing franchise business or needing help with operating costs.

Here are some of the most popular ways to finance a franchise:

1. Online business loans

Online business loans are term loans that potential borrowers can apply for online without visiting the bank. Alternative lenders offer a more simplified application process that can be completed online. Loans are typically available for up to $ 500,000 or more and, like traditional business loans, borrowers receive a lump sum payment.

While online business loans can be a great way to finance franchise development, they may be less affordable for novice and novice business owners. Potential borrowers who are trying to buy their first franchise may find it difficult to meet the minimum requirements of some lenders for running a business and annual income.

2. Business lines of credit

Credit lines enable borrowers to access cash up to the agreed credit limit depending on their needs. Business lines of credit range from $ 2,000 to $ 250,000 and interest rates are between 10% and 99%. Interest is only charged on the outstanding credit balance and borrowers can pay off the balance and reuse their credit line until the end of the drawing period – typically 12 to 24 months.

Business owners can use their entire credit line to fund a franchise, but this form of financing is best used for ongoing operating expenses. Lines of credit are also suitable for seasoned franchisees looking to expand their current business, not for novice franchisees who may not be eligible.

3. SBA Loans

The SBA offers small business owners a wide variety of loans, including the popular ones 7 (a) loan program. Loan amounts run up to $ 5 million, and the funds can be used for most business purposes, including the purchase of a franchise. That said, SBA loans require a somewhat lengthy application and approval process and may not be a good option for borrowers who need quick access to cash.

4. From the franchisor

Some franchisors streamline the funding process by helping new franchisees obtain loans and offering discounts on fees. However, this is a franchise-specific offer and not all potential business owners can take advantage of it. Visit the company’s franchise website to see if it offers financing, and review the franchise disclosure document for all relevant financing information.

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