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How to Finance a Franchise

How to Finance a Franchise

Individuals with the entrepreneurial spirit often decide to dip their toes in the water with a franchise operation because a franchise offers an already established business model and support to get the business up and running. For those new to entrepreneurship, franchises can be a way to limit some of the risks associated with becoming a business owner. That being said, as with any business, there are start-up costs involved. Opening a franchise requires that you pay a franchise fee as well as ongoing royalty fees. Since most people don’t have upwards of $100,000 sitting around, opening a franchise will likely require financing to get the business off the ground. Here are a few of the typical options franchisees utilize to secure the needed finances to get started.

Friends and Family

As you might with any other type of business venture, franchisees can look to friends and family to borrow money for startup costs. In fact, this is one of the most common means of financing a franchise. You might also consider a partnership with a friend or family member. Whether asking for a gift, borrowing money outright, or taking on a business partner, these types of loans can be more flexible in terms of repayment. If you do end up taking a loan from a friend or family member, make sure you write up a contract up front. Include expectations and terms of repayment; this can help you avoid conflicts down the road.

Traditional Loans

As with other businesses, banks and credit unions can be a source of financing for a franchise. These lenders are more inclined to finance franchises since they already have an established brand than they may be to invest in other new business owners. However, keep in mind that regardless of brand recognition, you may still need to put up collateral. You’ll want to be in good financial standing with good credit to qualify for traditional financing through a bank or credit union.

SBA Loans

In most cases, as long as specific criteria are met, SBA loans are available for franchisees. By opting for an SBA loan, franchisees can make smaller down payments and have more time for repayment than conventional bank loans. The SBA sets maximum interest rates on these loans as well, which can be beneficial.

Internal Franchise Financing

Since the business is a franchise, one place to inquire about financing is through the franchisor. Many franchisors in the U.S. provide some fraction of debt financing. While not all franchisors offer this, it’s at least worth checking into.

While these are the most common funding sources for franchisees to pursue, they may not be the only options available to you. If you’re interested in opening a franchise, do your research to determine the best choice for your particular needs. While finding funding to start your franchise can be challenging, it isn’t impossible.

At The Tutoring Center Franchise Corp®, our programs help children achieve long-term success, build concentration and focus, and, with our outstanding instructors, find the love of learning. If you’re interested in owning a franchise or learning more about The Tutoring Center Franchise Corp®, please visit our website or click below to request more information.

Article previously published on Medium.

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    The Tutoring Center® is exactly what my child needed to give him an extra boost for school. My son looks forward to going to tutoring, even after a whole day at school. I feel like we have found a permanent solution to any problems we have in school now and in the future.
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    The Tutoring Center® has been helping our son to improve his reading skills. He likes the environment. The consistency of the program is comforting, and he is motivated by the reward system. Consequently, he usually has a positive attitude about attending, which is one of the best things about the center for us, because in the past he could be resistant to extra help.
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    After a couple months of attending tutoring her report card was all A's and she had increased 3 reading levels! We couldn't be happier and more impressed!
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The Tutoring Center® Franchises are available to qualified prospective franchisees only in certain states. The Tutoring Center Franchise Corp. will not offer or sell a franchise unless registered (or exempt) in the state where the prospective buyer resides or where the franchise will be located. This information is not being directed to any resident of the following states: North Dakota, Maryland, Rhode Island, South Dakota, or Virginia, or any province, country or jurisdiction where the Tutoring Center Franchise Corp. is not currently registered to offer or sell, unless otherwise qualified or exempt. This advertisement is not an offering in the State of New York. An offering can only be made by a prospectus filed first with the department of law of the state of New York. Such filing does not constitute approval by the department of law. The information on this website is not an offer to sell, or a solicitation of an offer to buy a The Tutoring Center® Franchise. An offer to sell a The Tutoring Center® Franchise is made by Franchise Disclosure Document only unless an exemption applies.