There are some advantages to starting a business as a franchisee, but there are still some considerable costs. You may need to acquire financing of some kind to help you. Don’t worry though, there are plenty of options out there to help.
Costs You Will Be Required to Cover
Before you open a franchise location, you must think about some of the associated costs and expected expenses. You’ll typically need thousands for each step and unless you have the cash available, you’ll need to get a loan.
Real estate/build-out costs
Franchise fee (usually ranges between $20,000 to 50,000)
Supplies, inventory, day-to-day operations
When choosing a loan, make sure that it’s enough to cover some, if not all, of the franchise cost. Some lenders put stipulations on their funding, so read the fine print.
Loan Options for Franchise Cost
If you are truly considering opening a franchise, take some time to research your loan options to cover franchise costs. Though a loan may be your best bet, there may be some other options.
Commercial bank loans
Getting Approved for Financing for Franchise Cost
Now that you know you have options when it comes to financing for franchise cost, let’s take a look at how you can be approved. Of course, every lender is different and may have different requirements for each loan type- so make sure to get detailed information before you move forward in the application process.
Establish Your Business Plan
Most lenders don’t like to approve loans unless they are sure about what the funds are going to be financing. Therefore, most of them will want to see a business plan.
Improve Your Credit Score
Personal credit does have an impact on whether or not you are approved for a loan to cover franchise costs. If your credit score is high, they’re more likely to offer you a loan with better terms. On the other hand, if your credit score is low, they may not even approve you- or if they do, it’s with a high-interest rate and short terms.
Be Ready with a Down Payment &/or Offer Collateral
Some lenders will require a down payment, collateral, or both. Find out how much you’ll need to get approval and then start working on figuring out what you need to do.
While you may feel like opening a franchise is a sure thing to success, you must understand that there are costs associated with this process that some people overlook. If you are interested in learning more about how to pay franchise costs, contact Rexford Commercial Capital today.