Securing franchise loans to open a franchise business can be a smart choice for an aspiring entrepreneur. Becoming a franchise owner gives you the flexibility of owning a business with the added security of being part of an established brand. However, as with owning any new business, startup costs can be high, and you may require infusions of capital if you encounter hard times. Franchisees must also pay a franchise fee when opening a new franchise, as well as ongoing royalty fees. You truly need a good business plan, healthy cash flow, and solid franchise financing to succeed.
SmartBiz is a viable online loan option for franchise owners who want the security and low interest rates of an SBA-backed loan but with the ease and speed of an online loan. SmartBiz does not originate loans. Instead, it is a service that matches business owners with SBA-preferred banks.
Funding Circle offers various business lending products, including medium-term installment loans with repayment periods as long as five years, which are ideal for established business owners with a strong credit history.
SBA loans can be used to start a franchise. In fact, the long repayment terms, high borrowing amounts, and relatively low rates of SBA loans can be ideal for franchise financing. Both SBA 7(a) loans and SBA 504 loans can be used to fund franchises.
Getting approved for franchise financing can be difficult, particularly if you need startup funds, you need funding but have bad credit, or your franchise has been open for less than a year. However, you can do a few things to improve your chances of being approved for financing, even if it means you may have to take on a personal guarantee.
As a first-time franchise owner, in-house franchisor financing may be your best bet if your franchisor offers such an option. If you meet the requirements for other loans, compare the lending rates your franchisor provides you and those of outside lenders to ensure you get the best deal you qualify for.
Even as a franchisee of an established franchise brand, you still need to have a plan because no two franchises are the same. Having a solid business plan in place shows potential lenders that you know what it takes to run a successful business and will improve the likelihood that your application will be approved.
Online business lenders represent an important part of the financing industry, as bank loans remain out of reach for many entrepreneurs. Franchise owners benefit from online franchise loans, which have less-strict borrower qualifications than traditional business or SBA loans and put the funds in your account a lot faster.
Generally, online loans have higher rates than bank loans. However, they can be crucial sources of capital to many small business owners, including franchise owners, who would not otherwise qualify for financing. Moreover, some of the best online lenders offer rates that are on par with big banks.
Unlike traditional franchise financing options, the franchise loans offered by alternative financing come with terms, rates and amounts that are tailored to the needs of franchisees that need to open their next location.
Over 80% of franchise business owners with bad credit get turned down by banks for the funds they need. Fortunately, alt. financing companies like National approve over 90% of franchise applicants for the funds they need to expand.
Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.
A personal guarantee means that the business owner assumes the business debt in the event the business is unable to repay it. This helps protect the lender in the event of default and also makes it easier for a business to qualify for a loan when they might not have it without a personal guarantee.
If you need a loan to buy an existing business, getting approved with bad credit is challenging. However, buying an existing business often helps a new business owner jump over hurdles where many new businesses falter. The business assets and proven revenue stream potentially strengthen your loan prospects.
Personal credit reports are available through any of the three reporting agencies: Experian, Equifax and TransUnion. You can also check with an existing bank or credit card company to see if it offers free credit reports. Review the report for any errors. Contact reporting companies about errors with proof of payment, such as a receipt for having paid a bill on time.
Whether you are starting a new business or buying an existing business, make an appointment to review the entire plan with a Small Business Administration counselor. This person may be able to improve the plan so it better suits what a lender seeks. The counselor also has relationships with lenders who specifically provide SBA loans.
Whether you go through the SBA or go directly to a bank or credit union, make your package as professional as possible and look like a business owner when you meet with lenders. While you are a customer, lenders view their role more as investors and want to work with professionals. Complete the application and present the entire package as supporting documentation.
If you are denied a loan, ask the lender about having a credit partner. A credit partner is a co-signer to the loan, using their positive credit and maybe industry experience as a mentor to the company. You will probably need to give up a percentage of ownership to get a credit partner, but this might be the only way to establish the credit to buy the business. If you still can't get a loan, look to private investors within your network or microlenders involved with local economic development agencies in your area.
With more than 15 years of small business ownership including owning a State Farm agency in Southern California, Kimberlee understands the needs of business owners first hand. When not writing, Kimberlee enjoys chasing waterfalls with her son in Hawaii.
Prospective borrowers will typically need a minimum personal credit score of 500 to qualify for bad credit business loans. If you have bad credit, your goal should be to find a lender that offers a loan your score qualifies for, not a lender with the lowest rate or most favorable terms. Here are seven lenders that can help you achieve that goal.
We picked OnDeck for its variety of business lending products and same-day funding. OnDeck offers a term loan between $5,000 and $250,000 with repayments terms of up to 24 months. You can also access a credit limit of $6,000 to $100,000 through its line of credit with a 12-month repayment term that resets after each withdrawal.
Biz2Credit makes working capital loans between $25,000 and $2 million available to business owners with bad personal credit. Its working capital loans are paid back with your business receipts through daily, weekly or bimonthly payments. It only takes a few minutes to apply and 24 hours to receive a decision.
Fundbox is an AI-powered business lending platform that speeds up the application, decision-making and funding process. It offers decisions within three minutes and funds as soon as the next business day.
Prospective borrowers have two business financing options through Fundbox. Business owners can apply for revolving business lines of credit up to $150,000 with repayment terms of 12 or 24 weeks. Your available credit goes back up as you repay your line of credit.
Working capital loans of up to $400,000 are available with terms between six and 18 months; payments are due daily or weekly. If a business owner should choose a business line of credit, they can access credit lines up to $250,000. Lastly, Credibly offers merchant cash advances (MCAs) up to $400,000 with terms between three and 18 months.
Kiva is a microlender that offers a unique crowdfunding platform for a wide variety of prospective borrowers. Compared to traditional financing, Kiva utilizes your personal network and its own network of 1.6 million investor lenders to crowdfund loans up to $15,000 with terms up to 36 months.
Business owners with low credit scores must also demonstrate strong, stable cash flow to qualify for a business loan, and lenders may require collateral. For these reasons, an alternative form of financing like a merchant cash advance may be a better option for business owners with bad credit.
When you have bad credit, choosing a small business loan requires more than deciding how much to borrow and shopping for the most competitive rates. Instead, business owners with poor credit must find lenders with less demanding eligibility requirements and then identify the option that best meets their needs. Consider these factors when choosing a bad credit small business loan:
Online lenders may deposit funds into your bank account within a few business days of approval. In comparison, traditional banks may ask you to visit a bank or speak with a loan specialist to apply, and the entire application and funding process could take longer.
You might also be interested in a U.S Small Business Administration (SBA) loan because of the competitive rates and low down payment requirements. SBA Express loans are a type of SBA loan that may be easier to get than others since the administration responds to express loan applications within 36 hours. This is much quicker compared to the five to ten business days typical of other SBA loans. 59ce067264