Franchisor Financing
If you are looking to buy a franchise, then a unique option available only to you is that of franchisor financing. According to the International Franchising Association, most franchisors offer some type of financing, meaning the franchisor will assist in financing at least part of a franchisee's obligation.
The types of loan vary, with some franchisors making direct loans to the franchisee, while others (and the majority) offer access to third-party lenders knowledgeable about the specific franchise and its financial requirements. Other franchisor alternatives, aside from direct lending, include loan guarantees or working capital.
To see whether the franchise you are interested in offers any sort of financing, review the Franchise Disclosure Document (FDD). Item 10 discusses relevant financing options.
The actual process of obtaining franchisor financing is usually just like the one you follow when applying for any other type of financing. You will need to present the franchisor (if it is a direct loan) or its finance partner (if it is a third-party loan) your business plan, credit history, collateral options, other such documents, and loan requirements. Note: It is very rare that you would be able to obtain 100 percent financing for a franchise.
Bottom Line: Whether it is direct lending, third-party financing, or trade credit, another rich and often untapped source of business funding comes from working with your supply chain.
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