While some franchise ownership opportunities require lower start-up than others, all require some level of investment to get started on your path to business ownership. That means one of the first things you will need to consider is how you plan to finance your franchise.
Types of Financing for Your Franchise
It is common for business owners to use financing programs to open or acquire a franchise business, and there are a variety of financing solutions that may be available to you.
- Franchise Loan - Some franchisors will help you finance your franchise by partnering with lenders to offer loans to potential franchise owners. If a company offers financing, it’s usually listed in Section 10 of the Franchise Disclosure Document and you will want to compare the terms with other options to find the best source of funding for you.
- Traditional Loan - Banks and credit unions are a source of financing for all businesses, including for the purchase of a franchise. Keep in mind that lenders are more likely to finance franchises of an established brand that has proven successful in a variety of markets. However, you’ll still be subject to the bank’s underwriting standards and lending policies, meaning it will review your net worth and credit history. You also may need to put up collateral, regardless of the brand you’re associated with.
- SBA Loan: The Small Business Administration guarantees several loan products that banks, credit unions, and other lenders issue, including 7(a) loans, the most general and commonly used loan type.
- Alternative Financing Options - These can include 401K rollovers, IRA, unsecured lines of credit, and credit card financing.
Caring Transitions partners with three financing companies that helps future business owners secure “financing, not only for the franchise fees, but also startup costs,” Jim Stapleton, Vice President of Franchise Development explained. “Each has specialized plans that make the process quick, easy, and hassle-free.”
How Your Credit Impacts Your Ability to Finance Your Franchise
One of the biggest considerations a franchisor makes when examining a prospective franchisee is how successful that person will be in business. While there are many factors that are taken into account when making that decision, one of them is your personal credit history. Similarly, if financing your franchise, your lender will likely require a personal credit check.
So while your credit history is important, be assured that a bad credit score doesn’t necessarily mean an automatic denial by the franchisor or lender. It does, however, mean that you will likely need to go through a few more hoops to purchase your franchise.
- A low credit score can make it more difficult to get a loan - A low credit score tells a lender you may have struggled to make payments toward credit cards or other debt in the past, so it may be taking on more risk by loaning you money.
- If approved, you may have to pay a higher interest rate - With many types of financing, a good credit score will be helpful in qualifying for the best financing terms. This is certainly true of bank loans and SBA loans, but many other franchise financing options will involve a credit check as well.
- Plan accordingly to avoid further damaging your credit. Understand it may take time to build your business - and plan accordingly. If you have bad credit, ensure that you’ll be able to meet your monthly payments by evaluating the costs it’ll take to start, as well as how quickly you anticipate making money. These insights can help you gauge what to expect so that you avoid falling further into debt or hurting your credit.
Stapleton further explained, ideal candidates for Caring Transitions franchise opportunities “must have a 680 credit score or more and assets to qualify for most financing plans through our partners. Some of our partners offer a few plans that focus on credit repair & 401k rollovers as alternative financing options.”
Why Caring Transitions
Caring Transitions understands the success of the franchise system as a whole is driven by each franchise business owner's success. This is why there is a commitment to success throughout the ownership journey from research and inquiry to launch and beyond. As potential owners research finance options, “Caring Transitions helps with an introduction to their finance partners and allows the clients to pick which company works best for them” Stapleton stated.
By providing older adults and their families with trusted and comprehensive downsizing, right-sizing, estate sales, online auctions, and move management solutions, Caring Transitions franchise owners truly walk beside their clients and their families every step of the way. Similarly, as a franchisor, Caring Transitions provides franchise owners with the support and resources necessary for success from the very beginning and throughout the life of the business.
With low start-up and operational costs, Caring Transitions offers franchise owners national brand power, multiple revenue streams, and turnkey marketing campaigns. And now owning a Caring Transitions franchise has never been easier. We make the Steps to Ownership simple and straightforward so that you are comfortable making the right decision for your future.