How to Get Funding for a Franchise

date icon 4 minutes to read date icon 12th May, 2022

Venturing out into the franchising world is an exciting concept. You’ve already familiarised yourself with its benefits, features and modes of operations and you’re convinced that it’s for you. You’ve settled on a franchise brand and you’re ready to proceed. But one thing is stopping you and that’s the actual financial investment. It’s true that for many people, the costliest investment they’ll make in their lives after buying a house is purchasing a franchise. But does this mean it’s not possible? The answer is that it is. If you don’t have funds available and you’re wondering how to start a franchise with no money or how to get money to open a franchise, this post is for you.

How to get money for a franchise

Now for the crucial answer to the question: how to get funding for a franchise. There are several options you can choose from, depending on your circumstances. Let’s take a closer look at some of these. 

Government-backed funding: starting your own business is an activity that’s encouraged by the UK government, which offers support for individuals that are business inclined. Some of the requirements for such a type of funding include the need to pass a credit check, have all your paperwork in place as well as prove that the franchise you’d like to invest in is a viable option so that you can repay the money at a later stage. Some of the perks of this funding include the fact that you’ll be assigned a business advisor or mentor to offer you support and advice, which will set you on a growth trajectory. However, not every business will be able to benefit from government-backed funding and this may be a long shot for some franchisee hopefuls who are wondering how to become a franchise owner with no money.

Loans: a second option for acquiring financing to start your franchise business is to approach financial lenders such as banks for a loan. In most cases, the requirements for such a loan are quite stringent. You will be analysed in terms of your credit history and overall credit score as well as your ability to make repayments. Interest rates will be an important factor in determining which institution you go for as higher interest rates mean a higher repayment amount. Also worth checking out is the loan period. The longer the loan, the smaller monthly instalments you’ll have to make but it also means you’ll be in debt for longer. 

Partners and investors: when it comes to how to finance a franchise with no money, another option you have is to approach individuals who will either act as your partner by financing the venture while you run the business or investors who may get a portion of your profits once you get up and running and build a solid business over time. In many cases, you can have silent partners or investors fund your venture but while they may offer you the initial funding to get you started, they will also be entitled to a share of your profits.

Personal savings: personal savings, whether yours or those of friends and family who you approach for help, could be another option to consider. This is almost like making a cash down payment for your franchise and although this is a more uncommon situation, it can still work. However, to avoid souring relations with the people closest to you, it’s best to put your agreement for funding down in writing. The terms for the repayment should be put down on paper – whether the repayment will be done in monthly instalments, whether interest rates will be applied and how long the duration of the assistance will be for. In some cases, these are not going to be factors that you need to worry about. Ultimately, it will depend on every individual case and their relationships with their loved ones. This is one way of helping you figure out how to get money to start a franchise.

Help from your franchisor: as a final point, and probably the most important and viable one, you could consider approaching the franchisor for help directly. There are several ways this could develop. For starters, the franchise owner may already have well-established relationships with lenders that can offer favourable terms for loans. In addition, lenders will be more inclined to provide funding for a franchise business as opposed to startups. Secondly, you could enter into an agreement with the franchisor to deduct monthly instalment payments from the revenue you turn over each month. In essence, enabling you to understand how to buy a franchise with no money.

Conclusion

There are numerous types of franchises on the market in almost every industry you can think of. From product to service franchises, you’re sure to find one that suits your needs best. Many franchises, unlike the myths circulating out there, can be affordable options and they do not need serious investments of over half a million to a million pounds or more. If you’re wondering how to open a franchise with no money, the best option for you will depend on your particular case. However, it’s always worthwhile consulting with your chosen franchisor to see what benefits and better rates and deals you can get as a result of your business relationship with them. Being a franchisee opens many doors and is a wonderful way to start a secure business on the foundation of a proven business model. It’s only a matter of choosing the right option for you.