Starting a franchise can be expensive, but the good news is that you don’t have to bear the cost on your own. This article looks at several options for getting the capital you need to begin a franchise.

Option 1: Funding from the Franchisor

One way to get capital for a franchise is straight from the source—that is, the parent franchisor. Not all franchising brands offer financial assistance, but some do. For instance, certain franchises are willing to extend business lines of credit. To find out if this is an option, check out the parent company’s franchise disclosure document.

Option 2: SBA-Backed Loans

Loans backed by the Small Business Administration (SBA) are another way to obtain funding. This is not an option for all franchises: For eligibility, a franchise has to pass the SBA’s review process. However, you can find a handy list of options that have been approved by the SBA on the SBA’s website. 

Option 3: Business Loans

Another option for obtaining capital is with a business loan. For instance, Business Financing Loan offers franchise financing with a speedy application and approval process. The proceeds from such a loan can be used toward working capital, construction expenses, and more.

Option 4: Friends and Family

Friends and family are other potential sources of capital. They can either join as a partner or offer a loan. To avoid hurt feelings and unmet expectations, this approach is best done with assistance from a lawyer who can draw up an official agreement.

Option 5: Retirement Savings

Some prospective franchisees opt to tap into their retirement savings. Essentially, the franchisee sets up a C corporation, which takes ownership of the business. Then, the franchisee rolls their retirement savings into the C corporation’s stock program, which can then be put toward opening a franchise. However, this approach is risky: It takes work and research to avoid IRS penalties, and should the venture fail, the franchisee’s retirement savings may disappear.

For more tips on financing and other business topics, take a look at Business Financing Loan’s other blog articles.