4 Tips for Securing Funding for Franchise Expansion Based On Personal Experience
Securing funding for a franchise expansion can feel like an insurmountable challenge, but there are proven strategies to overcome it. In this blog post, insights from a Finance Partner and a Franchise Consultant shed light on effective methods to achieve funding success. The first piece of advice emphasizes the importance of presenting a clear, data-driven case, while the final tip focuses on determining loan qualifications upfront. With four expert insights in total, readers are equipped with actionable steps to navigate their funding journey.
- Present a Clear, Data-Driven Case
- Establish Credit Through the Business Entity
- Utilize the SBA Program
- Determine Your Loan Qualification First
Present a Clear, Data-Driven Case
"Focus on presenting a clear, data-driven case for your franchise's success."
When struggling to secure funding for franchise expansion, the key is to demonstrate both the viability of the business and the strength of your plan. Lenders and investors want to see that you've done your homework.
At Renown Lending, we often advise clients to prepare a robust business plan that includes Highlight the performance of your existing franchise location(s), showcasing profitability, growth trends, and customer demand.
Market Analysis Present realistic forecasts for revenue, costs, and timelines to break even. Investors want to know when and how they'll see a return.
For example, we recently supported a franchise owner who was struggling to secure funding. By working with them to refine their plan and emphasize their strong customer base and profitability, we successfully helped them secure a first mortgage-backed loan to fund their expansion.
The tip? Be transparent, data-driven, and prepared to show not just where the funding will go, but why your expansion is a smart, low-risk investment. Lenders and investors are far more likely to back a well-researched, confident proposal.
Establish Credit Through the Business Entity
When I owned my own franchise, I made the mistake of relying on personal business credit for additional funding. I advise my new business owners to work on establishing credit opportunities through the business entity, which is relatively inexpensive when using a professional service such as CapLadder to do the legwork. I invite them to at least schedule a consultation, they may be surprised at how quickly credit options can be made available (and perhaps even pay down other outstanding debt).
https://capladder.com/mcc_landing_page_1_ccifuentes_home?am_id=shawn1170
Utilize the SBA Program
If you're having trouble securing funding for franchise expansion, the SBA program is an often-underutilized resource that can provide flexible options for growth. For example, franchisees can take advantage of the SBA's 7(a) loan program, which allows for up to 80% financing of startup costs for new locations. If you're looking at resales, consider purchasing an existing business that operates in a similar space. With as little as 10% down, you can rebrand and integrate it into your existing franchise system. Structuring these acquisitions under separate entities for each location can also improve your eligibility for financing.
Determine Your Loan Qualification First
Find out what you qualify for first before shopping out your application. Are you looking for an SBA? Conventional? Bridge loan?
All of these have different parameters and have different pros/cons.
If you know for a certainty that within a month you will make a return on the money but don't want to wait 4-6 weeks to secure traditional financing for your business, a short-term working capital might make sense, even with the higher fees.
If you have absolutely perfect financials, a great credit score, want the absolute best rates and are okay with waiting around a month to get funded, work on an SBA loan.
If the financials aren't perfect, but the credit score is decent, and you want a good rate then work on a conventional loan.
All of these are great options, depending on your specific situation.
If you already have an existing franchise, you can get any of these options, again, depending on what you want versus what you qualify for.
