Franchise financing can be a frustrating process without knowing your options. Apart from your local bank, these options fall under 3 main categories:
1. SBA Financing
The U.S. Small Business Administration (SBA) guarantees loans for private banks/lenders. Loan programs up to $5,000,000.
2. Non-SBA and Specialty Financing
There are commercial lenders that specialize in franchise financing through equipment leases and structured term loans. There is also the ERSOP program, using your 401k or IRA as start-up capital without penalties, taxes or distributions.
3. The Franchisor
Many franchise companies either offer financial assistance themselves or help franchisees find a bank or other lender. Most have a lists of "preferred lenders".
Personal Assets
Whether it's SBA or non-SBA financing, anywhere from %15 to 30% of the total capital need can be required of the borrower. Franchise start-up costs vary wildly across franchises, so this could be anywhere from $20,000 to $200,000. A borrower may need to refi their personal propery or liquidate stocks, bonds, IRAs, 401k, etc.
Commercial Hard Money Loan Financing, Construction Rehab Flip Fannie Mae, Freddie Mac, FHA/HUD, CMBS
