Owning a franchise can be one of the most rewarding and exciting experiences of your life. Like many other major purchases, it usually requires financing. By Sherri Seiber

Owning a franchise can be one of the most rewarding and exciting experiences of your life. Like many other major purchases, it usually requires financing.

When shopping for a new home or a new car, how would you determine your price range? You could go to a dealership and test drive the flashiest vehicle you see on the showroom floor. You could meet with a realtor and tour the biggest, most expensive home they have to offer. Alternately, you could contact a lender and obtain pre-approval, which would be a much wiser way to make a major purchase.

Although obtaining pre-approval for a franchise purchase is more complicated than buying a house or a car, the premise is the same: a potential lender checks your personal financial history to determine the range they’re comfortable lending to you. This is to help ensure that you make the best investment possible. There are several factors that lenders consider before providing a business loan, which fall into four categories: credit, equity, burn rate and collateral.


Credit is your personal credit score and financial history. The lender will look to see that you have demonstrated responsible use of credit in the past. Items such as late pays, delinquencies, medical charge-offs, and credit card debt ratios will be considered, as will timely payments, length of credit history, and types of credit used. If your credit is not strong, FranFund will help you explore other funding options, including 401(k) business funding.


Burn rate is the rate at which an enterprise or individual spends money. The lender requires a business owner to have post-loan liquidity via an outside source of income – such as house payments, groceries, and utilities – to cover personal expenses, as well as the SBA loan and the business lease during the critical startup phase of the business.


Equity is what lenders refer to as your “skin in the game.” The personal equity – or cash – injection required by a lender can range from 10% to 30% of the total project cost. This number depends on the type of loan, the size of the loan, and the borrower’s financial health.


SBA Loans require the borrower to pledge an asset as collateral, such as a home. Although a home is the most common form of collateral, alternatives exist. SBA loans typically have the advantage of being lower interest and more flexible than alternative options. 

FRAN FUND: FranFund designs flexible funding plans that help new and experience business owners fund their franchises. We have a powerful and accurate pre-approval process. Our former bankers analyze a candidate’s financial situation the same way
a lender would, and we have a 99% success rate in obtaining loans for borrowers who received FranFund pre-approval! We offer ongoing support and make sure our clients know all of their options for funding single units through multi-unit expansions including SBA loans, conventional lending, and retirement plan funding with a risk-free SafetyNet® option.

For more information, contact Sherri: sseiber@franfund.com.

Whether you are considering leaving your current job to start a new venture, or if you want to expand your existing operation, it’s important to understand your business funding options. Getting an accurate pre- approval makes the path to getting a loan much shorter and straighter. To learn more about SBA loans and how to obtain a pre-approval, visit: https://www.franfund.com.

– Sherri Seiber