5 Tips on How to Fund Your Franchise Purchase
Although many people dream of owning a franchise, most don’t have all the cash needed upfront to purchase one. The good news is that many lenders prefer providing loans to those who want to buy a franchise—as opposed to starting a business from scratch—because quality franchises already have a demonstrated track record of success.
With this in mind, you might be able to fund your future franchise business faster and more easily than you think. Here are five ways to do it:
- Traditional Commercial Bank Loans
Aspiring franchisees often turn to their banks to explore financing their new endeavor. These term loans work like many others in which the lender provides you with a lump sum of cash and you pay it back over a designated period with interest in monthly installments.
To qualify for the loan, you will need to provide your bank with your business plan and credit history so it can determine if your creditworthiness merits the loan. If you have a high credit score and a strong financial history, you can expect the best loan terms and interest rate to purchase your franchise.
- Small Business Association (SBA) Loans
Partially backed by the US Small Business Association and funded by the institution’s lending partners, Small Business Association (SBA) loans are a prized option for funding a franchise. This is because SBA lenders often offer more types of loans with lower interest rates and longer repayment terms than traditional bank loans that do not have the government guaranteeing repayment of the loan.
While SBA loans are desirable, the credit score and other financial eligibility requirements are high and generally, the application process can take 2-4 months. Still, this option, which works just like a traditional commercial loan, is worth pursuing if your financial and credit history is strong.
If the franchisor you are considering working with is SBA registered and approved, this can lessen the length of time in the application process, and you have peace of mind knowing that the institution typically has already evaluated and approved the franchisor’s agreement.
- Alternative Lenders
If you are having difficulty qualifying for a bank or SBA loan, you may want to consider an alternative lender. These companies can also provide funding in tandem with another loan if you need to supplement the amount you have received from a traditional lender.
While alternative lenders usually have lower requirements for credit scores and demonstrated financial worthiness—plus shorter turnaround times for applications—their loans are often more expensive. They also tend to have shorter repayment terms and provide lower loan amounts than banks and SBA-affiliated lenders.
- Second Mortgage or Home Equity Loan
Another option you may want to consider and research is borrowing against the equity in your home and taking out a second mortgage or a home equity loan. You will need to meet with your lender to figure out if either of these is a viable option for you. There are several factors to consider here including the current equity in your home, the current market value of your home, your credit history, and what percentage of your home equity your lender is willing to lend you.
Some franchisors, like College HUNKS Hauling Junk & Moving, have begun to accept cryptocurrency to fund franchise fees. The innovative national industry leader in stress-free solutions for moving and junk-hauling needs now accepts both Bitcoin and Ethereum as payment for its upfront franchise fees.
"We recognize the financial independence cryptocurrency investments are creating, and franchising is an ultimate way to lock that in for life," said Nick Friedman, Co-Founder of College HUNKS Hauling Junk & Moving. "We pride ourselves on being tech-enabled, innovative, and disruptors of the moving and junk removal industry, as well as the franchise industry overall. The franchise industry is the largest creator of jobs in the country, and this will hopefully open up the opportunities to a new segment of prospective franchise owners who are looking for ways to diversify their cryptocurrency gains into an operating business that makes a positive impact."
Whichever method of funding you choose, you can expect to receive total support from the experienced franchisors at College HUNKS Hauling Junk & Moving when it comes to completing your application for funding.
Is franchising with one of the nation’s top franchisors worth doing? Our network of franchisees thinks so. The average College HUNKS Hauling Junk & Moving franchise owner revenue has increased 337% in the past 7 years, from $442,000 in 2013 to $1.31 million in 2020—proving that our business model is pandemic-proof. That average includes franchisees offering both junk removal and moving services and have been in business for at least one year.
College HUNKS Hauling Junk & Moving was originally founded by two college buddies with a beat-up cargo van and now has over 150 franchises providing full-service tech-enabled residential and commercial moving, junk removal, donation pickups, and labor services in the United States and Canada. We welcome the opportunity to speak with you about franchising with us and the best methods for securing the funding you need for purchasing your franchise. Contact us today to find out more about how you can become one of College HUNKS Hauling Junk & Moving’s franchise success stories.