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Franchise Business Loan

Franchise Business Loans Can Help Your Business

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Franchise Loans for Your Franchise Business

Starting a franchise is costly, due to a handful of obligatory fees. This makes running a franchise vulnerable to cash flow shortages.

Aside from operational expenses and business investments, a franchise must adhere to the fee guidelines set by the franchisor, which means many franchisees need to turn to a lender for help. A franchise business loan might be the answer to your working capital problems.

To run a franchise, there are often royalty and advertising fees associated that are taken from your weekly or monthly sales and earnings. Sometimes, franchise owners must pay for their employees to undergo training programs that are required by the franchisor. In some cases, franchisors might require local advertising on top of standard advertising fees.

Franchisees must also pay for a franchise fee before they even own the business. On top of all of these mandatory expenses are other inevitable business expenses, such as new equipment or furniture, and payroll. These costs can easily pile up, making it difficult to earn a profit or save money.

SMB Compass wants your franchise business to thrive in today’s competitive market. When you work with us, we will help you find the right financing product to set your franchise up for success.

4 Ways to Utilize a Franchise Business Loan

Business owners know that finding the right business to franchise is challenging. But in fact, finding the right franchise business loan is even more challenging. SMB Compass knows that franchises need working capital to succeed. We believe in your franchise’s potential for success, so we offer the best franchise business loans for you.

Here are four ways on how you can use a franchise business loan:

Franchise Fee Payment

Most businesses charge an upfront fee before you can open a franchise. The amount of the fee varies depending on the type of business, but the franchise fee can often be tens of thousands of dollars and is usually nonrefundable. For example, Jamba Juice charges a franchise fee of $25,000 per store, and Cruise Planners charges $10,995.

Royalty and Marketing Fees

Other than the franchise fees, franchisors often also collect royalty and marketing fees. These fees are usually a percentage of the franchisee’s sales, and the amount varies by company. For instance, a Subway franchise pays about 8% per week of sales in royalties, along with a 4.5% per week fee for advertising.

Additional Working Capital

Most businesses apply for a loan to increase their working capital. Seasonal sales fluctuations, cash flow problems, and business expansion are just a few of the many reasons why franchises apply for a business loan. You might not know how much money you need, but as your business grows, you’ll definitely need extra working capital to run your franchise.

Inventory

If you are starting a retail franchise, you’ll need to stock up on inventory. Especially if you are opening a retail franchise or any other franchise that sells things, you need to purchase the products to sell them. While every franchise business is different, franchisees are usually required to buy around $20,000 to $150,000 worth of inventory to get started.

Top 4 Franchise Loan Programs for Your Franchise

SMB Compass will walk you through our personalized selection of franchise business loans. Whether you need to pay for franchising fees or add working capital, our financial advisors will find the best franchise business loan for you. Here are some of our popular loans among franchises:

Franchise Business Loans

SBA 7(a) Loans

The Small Business Administration encourages lenders to offer loans to small businessesby pledging 85% of the loan. This means that, compared to bank loans, an SBA loan is more accessible for small business owners.

This type of loan often offers more attractive terms compared to traditional loans, but before you can qualify for an SBA loan, the Small Business Administration has to approve your franchise and list it on the Franchise Directory. Otherwise, you won’t be able to qualify for an SBA loan. To get listed on the Franchise Directory, the franchisor must submit their Franchise Disclosure Document (FDD) to the Small Business Administration for review.

Business Line of Credit

In a business line of credit, lenders will determine a maximum credit line, which you can withdraw funds from whenever you need to. There are no interest charges until the funds are withdrawn, and you only need to pay back the money you’ve used.Lenders determine the terms and interest rate of your loan after checking your personal and business credit, as well as your cash flow.

Franchise Business Loan
Multi Year Term Loan

Multi-Year Term Loan

With a multi-year term loan, franchise business owners can pay back the loan within two to five years. This financing option has affordable monthly payments, yet gives you more than enough cash flow to cover business expenses. You must have strong business credit, good historical cash flow, and a great personal credit in order to qualify.

Bridge Loan

If you’re looking for a short-term loan to fund immediate financing needs, another type of lending product to consider is a bridge loan. This type of loan enables you to seize new business opportunities, fill in cash flow gaps, and pay for unexpected businesses expenses. Instead of using your personal savings or passing on once-in-a-lifetime business opportunities, bridge loans can give you the funds within 24 hours.

Bridge Loan

Top 4 Franchise Loan Programs for Your Franchise

SMB Compass will walk you through our personalized selection of franchise business loans. Whether you need to pay for franchising fees or add working capital, our financial advisors will find the best franchise business loan for you. Here are some of our popular loans among franchises:

Franchise Business Loans

SBA 7(a) Loans

The Small Business Administration encourages lenders to offer loans to small businessesby pledging 85% of the loan. This means that, compared to bank loans, an SBA loan is more accessible for small business owners.

This type of loan often offers more attractive terms compared to traditional loans, but before you can qualify for an SBA loan, the Small Business Administration has to approve your franchise and list it on the Franchise Directory. Otherwise, you won’t be able to qualify for an SBA loan. To get listed on the Franchise Directory, the franchisor must submit their Franchise Disclosure Document (FDD) to the Small Business Administration for review.

Franchise Business Loan

Business Line of Credit

In a business line of credit, lenders will determine a maximum credit line, which you can withdraw funds from whenever you need to. There are no interest charges until the funds are withdrawn, and you only need to pay back the money you’ve used.Lenders determine the terms and interest rate of your loan after checking your personal and business credit, as well as your cash flow.

multi year term loan

Multi-Year Term Loan

With a multi-year term loan, franchise business owners can pay back the loan within two to five years. This financing option has affordable monthly payments, yet gives you more than enough cash flow to cover business expenses. You must have strong business credit, good historical cash flow, and a great personal credit in order to qualify.

Bridge Loan

Bridge Loan

If you’re looking for a short-term loan to fund immediate financing needs, another type of lending product to consider is a bridge loan. This type of loan enables you to seize new business opportunities, fill in cash flow gaps, and pay for unexpected businesses expenses. Instead of using your personal savings or passing on once-in-a-lifetime business opportunities, bridge loans can give you the funds within 24 hours.