Offering you both the independence to be your own boss as a small business owner, and the support from an already established large corporation, franchises offer the best opportunity for everyone with the desire of becoming an entrepreneur. Many people across all walks of life dream of owning their restaurants – either as active players in running the everyday business or as hands-off investors who run the business in the background. Whatever the case, it is a daunting experience for potential investors to start from scratch, especially without the proper financing options. However, if you are interested in becoming a restaurant chain franchisee, there is no need to worry if the hefty sums of money required to start and operate one are challenging to come by. This article explores and breaks down different methods you can use to finance your restaurant franchise.
1. Restaurant Franchisor Financing Programs
“Great franchisors focus on franchisee profitability, which helps to grow a system.”
Before you begin to look for alternative financing programs, it is worth starting with the franchisor itself. Even if you are purchasing the franchise for the first time, there are high chances that the franchisor has engaged in similar transactions before.
The downside with this approach, however, is that not all franchises offer financing programs. However, at the very least, the franchise may assist you in connecting with a lender who has approved past applications to aspiring franchisees.
2. Commercial Bank Loans
Beyond going directly to your franchisor for financing, the most likely option you had in mind is to walk in a bank and get a traditional term loan. This is still a viable option where you can borrow a significant amount of money and use it as capital for your startup, then pay back the loan with interest on a set payment schedule.
Bank loans are a great way to get capital because of their low-interest rates compared with other borrowing facilities. However, to qualify for a large amount of money, you will need a nearly perfect credit score and a strong business track record.
In addition, banks are notoriously known for their risk-averse behavior in the small-business lending space, making it difficult for growing potential investors to obtain restaurant franchise financing through this option.
3. SBA Loans
Of all the loans offered, the SBA loans tend to be the most appealing for aspiring franchisees. This is because the loans are backed up by the US Small Business Administration, and receive funding from their intermediary lending partners.
Unlike working with a commercial bank, SBA loans are better for first-time franchisees since the loans are geared towards this demographic.
Despite its desirable appeal, it is worth noting that qualifications standards are stringent, and the process takes a very long time before being processed because it has to be approved by both the government and lenders.
That being said, it is imperative for you to weigh your chances of being approved before spending significant time pursuing a finance option that is unreachable for you at the current stage of your franchise.
4. Online Alternative Lenders
From short term loans to equipment loans and even long term loans that can fully cover the cost of starting your franchise, online loan lenders virtually provide you with the credit needed to cover your business needs.
This is perhaps the best news to restaurant franchisees, especially those who need a large amount of capital within a short turnaround time. When you apply for a loan with an alternative lender, the process is short, usually processed within a couple of hours, and you get your cash within a day or two.
Alternative lenders like RidgeStone Capital, offer competitive rates, which are crucial to opening your desired restaurant franchise. Our exemplary services include:
- Flexible Business Loans – You can get up to $250,000 within 30 minutes with a simple one-page application.
- Business Line of Credit – You can secure our business with a business line of credit worth up to $500,000 with rates as low as 9.99%
- Equipment Financing and Leasing – There is no need for you to spend a lot of money on depreciating assets when we can help you lease!
Our application process is simple and takes a significantly short amount of time:
- Apply online through a one-page application. All you need is a tax ID and three months of business statements with you.
- Our experts will call you within one business day to discuss your loan options. If approved, you choose the terms that best fit your condition and needs.
- The last stage is receiving the funds deposited to your bank account as soon as the next business day.
While the upfront cost of starting your restaurant franchise might seem daunting at first, it should not be a concern because, at RidgeStone, we understand you, and we are more than willing to help. For more information regarding restaurant franchise financing, don’t hesitate to talk to us, and we will be glad to assist.