Loans To Purchase New Franchise Locations or Expand Existing Franchises
Franchise Financing is a method to purchase or expand franchise business while conserving capital for marketing and operations by financing part of the costs and repaying the loan in installments over a set period of time.
There are generally two sources of franchise financing including Term Loans and SBA Loans.
Approximately 10% of SBA loans are issued to franchises; and both the SBA 7(a) and 504 loans can be used to finance or expand franchise locations. The SBA loans will offer better rates and terms than the term loans since SBA loans are partially guaranteed by the US government; however, all of these business loans typically require cash for a down payment, a good credit score, and collateral.
Franchise financing to be used for the purchase of a new business is much easier to secure when it's an established franchise brand with multiple successful locations than it would be with a newer brand that doesn't have a similar track record of success. This is an important consideration when deciding which franchise opportunity you may want to pursue.
Some Franchisors do offer an in-house financing program. They are generally at higher rates than a term loan or SBA loan, however, you may not need to put up collateral when financing directly with the Franchisor.
Term Loans & SBA Loans Are Generally The Best Sources of Franchise Financing!
Franchising is an effective way for an entrepreneur to start a new business that immediately launches with a recognized brand name and established policies, practices, systems, and a proven plan for success.
This can enable a person with little or no background in an industry to quickly build a successful operation. However, these franchise opportunities come at what is often significant cost, making the bar to entry difficult for many would-be franchisees. Many times, the start-up costs can include real estate purchases, building renovations, and other expenses that can range into the hundreds of thousands, and even millions of dollars.
Franchise financing makes these costs affordable for many business people by providing them the capital they need to purchase a successful franchise operation and repay the funds over time in periodic installments.
CyoGate has several franchise financing options and which is best will be based on a number of factors including the strength of the borrowers loan package and the amount of funds being requested.
As previously stated, investing in an established franchise brand that already has multiple successful locations will make securing financing much easier.
For borrowers with the best qualifications and willing to invest some extra time in the additional paperwork that will be required, one of the SBA loans will provide the best rates and terms to purchase or expand a franchise. The SBA can provide up to $5 million in franchise financing for the purchase of real estate, equipment, construction, and working capital. Generally, the SBA loans will have a term of up to seven years, except for real estate purchases which can be financed for up to 20 years, or more.
Franchise financing term loans are generally for up to $500,000 per location and have terms of up to eight years. With a private placement, it's possible for CyoGate to secure more in funding. Leasehold operations are perfectly acceptable so, while home-based franchise operations will not qualify, no real estate assets are required.
For more information on CyoGate's Franchise Financing options, please contact us today!
Get The Help You Need!
At CyoGate, because our success is based on your success, we are always happy to help. Our professional team of Business Funding Specialists are available to help you find the best business loan and credit card processing options available.
