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How do you raise the capital to purchase a franchise?

On Behalf of | Mar 23, 2022 | Buying A Franchise

Buying a franchise can be like purchasing a fast-track ticket to your ideal vacation destination. The costs are higher, but everything is faster and fully planned for you. You can get where you want to go that much quicker by investing in a company that already has a good reputation and an established market share.

Of course, buying into a successful franchise can be expensive. The price tag for such an investment is often six or seven figures, which can be prohibitive for some entrepreneurs. You can potentially finance the purchase if you don’t have that kind of liquid capital available.

What are the different financing options when buying into a franchise business?

Financing from the company

Businesses that offer franchise opportunities will sometimes offer internal financing. Provided that you meet certain standards for your personal assets and your credit history, the company offering the franchise opportunity could also finance your purchase.

Secure a bank loan

Some lenders will happily give potential entrepreneurs money to buy into franchise businesses. The creditworthiness of the individual and the local market will strongly influence how likely a lender is to agree to such a transaction. You may have to perform research to support your claim that the franchise will succeed in your area.

Independent business investors

Companies and even individuals are always possible sources of investment. There are those who want to invest in your local community and those who seek returns on funds that would otherwise gather dismal interest rates in a bank account somewhere. As with banks, convincing documentation and market research will be necessary to tempt independent investors.

Small investments from friends and family

Some people have numerous friends and family members who would happily make small investments in the business. They can either have certain rates as investors or ask for quick repayments.

Either approach can be worthwhile for someone hoping to start a franchise but unable to connect with more traditional financing. Bringing on a partner who has capital resources but no desire to actively manage the business could also be a viable option.

The expenses of starting a franchise don’t have to keep you from running a successful business. Knowing your options when buying into a franchise makes it easier to succeed in this ambitious endeavor.

NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.