How to Finance Low-Cost Franchises for High Returns
Picking a low-cost franchise requires fewer out-of-pocket costs. However, it still requires careful financial planning to be successful.
Smart financing leads to long-term profitability, but finding financing that is right for you can be challenging. Learn financing options and get tips on securing funding to maximize your return on investment.
The Fed’s annual Small Business Credit Survey reveals that at least 76% of small businesses rely on financing during the first two years of operations. Financing helps small businesses pay operating expenses, cover repair costs, or pay down debt. It also fuels growth and provides a cushion for the unexpected.
The franchise model offers proven business success with built-in training, operational guidelines, and ongoing support. Lenders often see franchising as a lower risk than startups because it has a track record of results. The franchise disclosure document (FDD) can also provide financial insights from top-performing locations for transparency.
Franchisors have a wealth of experience helping small business owners determine the best funding for their ventures. Many franchisors partner with lenders familiar with the brand to help streamline the funding process.
Types of Financing for Low-Cost Franchises
How do I maximize my investment in a franchise business and evaluate franchise profitability? The right financing can make all the difference.
Securing financing with a low interest rate, low repayment term, and limited prepayment penalties can lead you to profitability. There are benefits and drawbacks to each type of financing. Let’s explore five common methods of franchise financing:
- Traditional bank loan: If you have good credit, a traditional loan is a viable financing option. A bank loan may require a down payment and have prepayment penalties.
- SBA loan: A loan from the U.S. Small Business Administration features low interest rates and long repayment terms. This makes this type of loan an attractive franchise financing option. The application process for SBA loans is lengthy, and approval takes time.
- ROBS: Rollovers as business startups allow you to withdraw retirement savings from a 401k or IRA with no penalty to fund your venture. This is a great option for people who don’t want to take on debt.
- Franchisor financing: In-house financing can have a low barrier to entry and a no-hassle approval process. Not all franchisors offer this type of financing.
- Family and friends: About 15% of small businesses turn to family and friends to achieve their entrepreneurial goals. Having a business partner provides fast access to capital with flexible terms. While business with family can be stressful, having supportive stakeholders invested in your success can offer valuable emotional encouragement.
Franchising Funding Tips
Before you begin exploring financing options, we’ve got some tips to help simplify the process:
- Build a solid business plan: A good business plan is essential to your strategy. This is especially true if you seek a bank loan or funding from the SBA.
- Improve your credit score: Take steps to improve your credit score. Lenders use personal scores to determine financing eligibility and rates.
- Explore multiple options: Research different options. The financing strategy you use should match your timeline and budget.
- Ask your franchisor: Franchisors are a great resource. They can provide valuable industry insights and help connect you with lenders.
Start Strong with Bath Tune-Up’s In-House Financing
Bath Tune-Up is a bath remodeling franchise focused on giving customers easy solutions to upgrade their homes. Our curated designs and online tools save time and keep the renovation running smoothly.
The initial investment to open a Bath Tune-Up location starts at $109,930. As part of our in-house financing program, we offer $36,000 in financing to qualified candidates. Our financing option features no down payment, a five-year term, and a competitive 10% interest rate plus finance charge with no prepayment penalty.*
Remodel Your Future with Bath Tune-Up
Our franchisees lead the day-to-day operations, managing everything from sales and marketing to project oversight, product ordering, and accounting. Most operate with a small team of one to two employees and a partner with a few trusted subcontractors. This lean model allows owners to focus on their strengths while delegating other tasks for maximum efficiency and growth.
You can operate from a home office to keep overhead costs low or debut a small retail showroom for increased visibility in the community. Bath Tune-Up offers national marketing support and a local marketing toolkit to help generate customer leads and drive referrals.
Ready to invest in a franchise with Bath Tune-Up? Inquire now to learn more about launching a bathroom remodeling business in your community.
*See Franchise Disclosure Document for details.