What Are Your Financing Options When Buying a Franchise?

franchising on laptop screenNowadays, you can buy a business or franchise without spending a lot of money. You should consider these financing options before joining a signage franchise like Signarama.

Most banks and lenders in Australia implement an accreditation system for franchisors. For instance, a franchisor may have a partnership with a local bank or lender, which may provide up to half of your desired amount to cover expenses. Buyers would shoulder the remainder, but remember that there are certain limitations.

Eligible Borrowers

In case a borrower plans to buy a business that is not accredited, you may use your home as security for the loan. Most lenders will not agree to grant a loan and secure it against the business, given that there is no guarantee of favourable business returns.

Those who plan to use their homes as collateral can determine their borrowing capacity by knowing their properties’ worth. A lender may provide up to 80 per cent of your home’s value. If you dislike having to find a specific lender that accredited a franchise system, this is an excellent choice, especially if you already decided on a particular business.

Cost of Franchising

The Franchise Council of Australia said that the upfront franchise and setup fees might cost up to $1 million, depending on the business. Buyers usually apply for a loan in this case, although some franchise systems only require a low fee.

If the cost of joining a franchise only costs $5,000, consider saving money instead of taking out a secured loan. You’ll avoid paying interest fees in the process.

Franchise buyers have an option to control their out-of-pocket expenses by knowing the different types of available financing. Since some loans need to be secured, think carefully if you want to use your house as collateral.

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