If you’re a franchisee, you have less power than the average small business owner, since you need to operate within your parent company’s guidelines. While you get to decide the details of expanding your business, ultimately, it’s up to your parent company to make the final call. Still, belonging to a franchise has many benefits, including the stability of an already-established company and access to your parent company’s network of business relationships. As you navigate this complex business arrangement, don’t forget to educate yourself about these forms of franchise financing.

Small Business Administration Loans

The SBA is a government agency that helps small businesses remain competitive in an economy dominated by big businesses. Even though you’re part of a large parent company, you can apply for these loans. While the SBA offers many programs, the 7(a) loan is probably the best fit for your company. The SBA’s limit on this loan is two million dollars, but be prepared to receive far less than that. Check for special programs if you work in an underserved area or belong to an underrepresented group.

Conventional Loans

The standard small business has trouble receiving approval for a conventional loan, but your status as a franchisee gives you an advantage. Banks are more willing to take risks when they recognize the name of your parent company. Still, they do care about your individual branch’s performance; be prepared to provide your financial history and credit score. Don’t forget to find property or other assets to serve as collateral. To increase your chances of being approved, look into listing your company on the Franchise Registry.

Investors

You should always look out for potential investors. Although they receive a portion of your profits depending on the size of their investments, you do not have to pay interest on their principal the way you do when you take out a loan. Contact your parent company’s marketing department for ideas on who to approach about a new investment.

Finding franchise funding to expand to a second location or increase your product offerings is often challenging. Take your time to explore different loan options, both traditional and government-funded, as well as other sources of funding. Make sure to research your options and begin your applications well in advance of when you need the money, since approval can take up to several months. Most importantly, don’t sign any contracts related to your expansion until you receive your funding.

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