8 Benefits of Using Franchise Financing to Open a Franchise

Doodles about franchise on chalkboard.

For many entrepreneurs, franchising provides a safe way to go into business for one’s self. A franchise has an initial cost, but you’re not necessarily required to have that amount saved. Many franchisees opt for financing because of all the benefits.

1. Complete Financing — You can finance 100 percent of the cost of entry. You can even finance more than that initial cost with a suitable business plan. If you can demonstrate that this is what the business needs to be established and then successful, financing will allow for it.

2. Income — A regular income is among the biggest challenges new franchisees face because even established franchises do not immediately turn a profit in new locations. This gives you the breathing room to pay your day-to-day expenses.

3. Existing Debt — If you have existing debt that does not prevent you from being financed for this opportunity, then you can roll that debt into the franchise financing. This allows you to deal with a singular debt obligation rather than multiple different financial obligations.

4. Full or Partial Financing — You do not have to finance 100 percent of a venture. You can do that, but if you have investment resources that you want to put toward it, then you can just use financing as a means to cover what you do not have.

5. Financial Flexibility — If the business plan is sound, which many franchises inherently offer if a strong location is chosen, you have great flexibility in your loan terms. Such loans often range from as short as 36 months to as long as 84 months, which is often necessary for full financing.

6. Managing Tax Obligations — As a business owner, you’ll have tax obligations: federal, state and local. Financing is a means through which you can manage initial tax burdens so that they are less of a burden and can be accounted for when the business is on firm footing.

7. SBA Loans — SBA loans are partially guaranteed by the Small Business Administration. Such guarantees result in more favorable rates, and if you qualify, it can substantially lessen your obligation and make your business more successful sooner.

8. Franchisor Relationships — Many franchisors have relationships in place with financiers. Some even offer in-house financing, and these opportunities can make the entire process much easier because the lending is specifically tailored to the business. In-house financing can also be used to complement outside financing as well as your own investment if applicable.

Financing is not the best option for all entrepreneurs. But it is the best option for many and often turns a dream into a reality where it would otherwise be impossible. If you’re considering a franchise, this financial avenue is at least worth your time to investigate.