8 Ways To Fund Your Franchise Business

New business owners often underestimate the costs involved in launching and running their new franchise business, and subsequently find themselves with no money to get started or keep running until they’re generating enough income to sustain themselves. This can be incredibly frustrating, especially when you’ve invested so much time and energy into researching your franchise and you’re so close to getting started! But don’t worry—it doesn’t have to be that way! There are lots of strategies you can use to fund your franchise business, even if you don’t have your own money or aren’t wealthy at all.

1) Save up

The first way to fund your franchise business is by saving money in an emergency fund. This may seem counterintuitive, but planning ahead will help you better handle any challenges that come up along your path toward launching and growing a successful business. Plus, money saved can earn interest and keep pace with inflation (meaning it’ll have more purchasing power), so it won’t go as far later on.

2) Partner with an existing business

It might sound a little backward, but one of the best ways to get funding for your franchise business is to partner with an existing business. Talk to local restaurants and retailers in your area that are similar to what you plan on offering; perhaps they’d be interested in investing. (Just make sure you get something in writing!)

3) Use credit cards

Don’t worry, we’re not suggesting you run out and open up a ton of credit cards. But there are instances when it makes sense to use your credit card to start a business. For example, if you purchase equipment or inventory using your credit card and then pay off your balance each month on time, you can take advantage of low interest rates.

4) Get a low-interest personal loan

A personal loan can help you cover your costs up front, such as franchise fees and start-up inventory. If you already have a credit history, you may find it easier to secure funds than if you’re just starting out. However, be careful—because personal loans typically have high interest rates attached.

5) Borrow from friends and family

Perhaps you’ve got a parent or close friend who would be willing to lend you money for your franchise. In exchange, you’ll promise them an ownership stake in your business—and that share can come out of profits from day one.

6) Get pre-approved for bank loans

Banks can be an excellent source of financing for small businesses, and getting pre-approved for a loan from a financial institution can greatly reduce your paperwork (and time spent filling out applications) once you’re ready to pursue a bank loan. By connecting with a financial institution before you need money, you’ll already have established some credibility with them in case you ever have to secure financing.

7) Use a business partner loan program, such as Franchise Finance Group.

A good partner can bring capital, connections and business skills that you lack. If you already have a partner in mind, it’s possible to finance your business with a loan from their existing assets. These loans are usually high-risk, so before applying for one make sure you know what you’re getting into.

8) Use your retirement funds

Using your retirement funds for your franchise business may seem like a bad idea, but if you start up a franchise, there’s usually little to no startup costs and low risk associated with it. Use your 401(k) or Roth IRA funds to help fund your new venture!