What Types Of Business Loans?

There are many types of franchise business loans, including the following:

Collateral & Equity Lending: The problem with bank funding is that once you mention starting a new business, they ask for collateral. Their preferred collateral is your home and other tangible assets. This makes home equity loans popular among those seeking to finance a franchise business. Due to demonstrated track records, lenders are increasingly confident in lending to Franchisees. Many franchisors, due to their proven performance are known to lenders in their industry and are comfortable with franchisees securing financing for a portion of their investment. This may result in both franchise loans that are not only secured with real estate, but is secured against the business itself.

Small Business Administration (SBA) Guaranty Loan: The use of a Small Business Administration (SBA) guaranty allows a bank to be less stringent. The SBA guaranty provides your bank with the assurance that a certain percentage of the loan will be repaid under any condition. SBA guaranteed lenders find security that there is a plan in place to help you succeed.

High Risk Franchise Loan: If there are more than 8-10% failures for a franchise, this will be a problem for the franchisee because most lenders won’t approve a loan. Also, with that failure rate, you probably don’t want a franchise loan anyways.

Franchise Loan Components: Your franchise loan institution can offer expertise in a number of areas, including, acquisition finance, equipment finance, refurbishment finance, refinance, bulk stock purchase and succession planning.

Non-Bank, Non-Conventional Lenders: The good news is that there are many franchise loan programs, other than banks and the SBA, available for franchisees. Non-bank lenders don’t have to operate under the strict rules and regulations of regular banks. This form of franchise financing is helping in dealing with poor or bad credit. Lenders here will work with franchise borrowers who may have poor credit or bad credit, and work with different criteria than banks.

Please note, That while there are financing options available that may help you qualify if you are short of capital, any franchisor will want to see that you don’t start out your business oppressively heavily in debt.

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