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Choosing the Right Business Loan for Your Low-Cost Franchise

  • July 15, 2016

Whether you’re brand new to lost-cost franchising or looking for new ways to inject capital for expansion after a few years in a GFG franchise, finding the right financing can really help you boost your business. Before starting the application process, you’ll want to know how much money you need, what you need it for, how fast you need it, how quickly you’ll want to pay it back, and how much collateral you have. Thankfully, getting a loan for a franchise is often easier than getting funding for your own startup business, especially when you’re part of a company with a brand that’s popular with millennials like Hot Dog on a Stick.

a wallet full of money

SBA Loans

Small business administration loans are one of the most popular funding instruments for low-cost franchise owners like yourself. These loans are given out by banks, microlenders, and development organizations but are partially guaranteed by the federal government. The peace of mind these guarantees provides gives lenders more confidence and borrowers more flexibility. For as little as 10% down, you can get the capital you need to start or expand your business.

There are several types of SBA loans from which to choose, depending on your circumstances. They include the following:

  • 7(a) Loan Program, the most common and flexible type of loan
  • Microloan program for new and growing small businesses
  • Equipment and real estate loans, also known as the CDC/504 loan program
  • Disaster loans for replacing equipment or property after an accident or natural disaster

One special part of SBA loans for franchise owners is the franchise registry. The registry provides an expedited process that connects lenders with entrepreneurs like you who are looking to expand or start their business using a proven model for growth and profit. There are a wide range of support services available on the franchise registry website to help you get started, including a matchmaking service that can connect a lender with a dependable borrower like you.

Traditional Loans

In some circumstances, you may be able to get a traditional loan from a bank if you don’t want to go through the SBA process. While traditional loans may have less red tape and lower interest rates, they often require a much larger down payment and significant collateral, usually between 20% and 30%. You’ll need to have assets like real estate, expensive equipment, or even your own home as collateral. It’s a good idea to have a lawyer look over the paperwork for a traditional loan before you sign anything.

Other Low-Cost Franchise Funding Options

Many franchisees decide to get funding for their operations outside the banks for a variety of reasons. Alternative funding methods can include borrowing from friends or family, home equity loans, and personal loans from private lenders. Some people even take money out of their retirement funds to start their franchise. All of these options have benefits as well as disadvantages. You’ll always want to weigh the risks of defaulting before getting into any agreement.

By exploring all your funding possibilities, you’re likely to find a low-cost franchise loan that offers you the maximum return on investment. With GFG brands on your side, you’ll pay back that loan fast and run a thriving business for years to come. Contact us today to find out more.

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