Operating a franchise can help you enter the world of
entrepreneurship and earn a profit once you are settled. When you
obtain a franchise of an established brand, you need not struggle with
branding, and your operating protocols are well-defined. However,
every brand will have one requirement: you need sufficient working
capital to pay for the franchise and manage the operating expenses
later.
In India, the franchise option allows you to expand an
established brand into a profitable business in new markets. Moreover,
you can avail of a loan for a franchise business to easily meet your
financial requirements.
This blog covers how you can seek a loan
for a franchise and what are the various indicators that need to be
considered while tracking a new opportunity. Continue reading for a
detailed understanding.
5 Loan Options for Your Franchise Business
Whether you are planning to scale your franchise business online or offline, these are the best ways to finance your venture:
1. Obtain Financing from Franchisors
If you have already chalked out your franchise business plan
and are in urgent need of money, consider approaching a
franchisor. Many franchisors tie up with specific lenders who can
offer more personalised loans that suit your specific business
prospects. Also, taking this decision can offer additional
benefits.
For instance, you can expect one-stop-shop solutions
while purchasing equipment that is indispensable during the initial
days of the business. As the franchisor will be able to assess the
associated risks in advance, they will guide you in a better way in
terms of financing.
2. Apply for a Franchise Business Loan
These days, you can easily apply for a Franchise Business
Loan from various financial institutions like NBFCs. This loan is
usually collateral-free, comes with favourable interest rates, and
also offers flexible repayment options.
It must be noted that
before approving your loan application, the lender will thoroughly
assess your business plan. This step is not skipped as it plays a
crucial role in determining your repayment potential.
3. Opt for a Line of Credit for Business
Many businesses tend to opt for a business line of credit that
comes with a pre-defined limit, allowing them to avail of funds as and
when required. You can avail of a line of credit for your franchise
business and use the funds as needed up to the credit limit.
4. Pursue Alternative Lending Options
In case you’re unable to avail of loans from conventional
financial institutions, you can choose alternate lending options like
crowdfunding. You can also look for lenders who specifically offer
Business Loans. However, it is important to note that such loans may
come with a higher interest rate and strict repayment conditions.
5. Seek Funding from Your Network
You can always choose to seek out funding opportunities for your
franchise within your network or personal groups. However, it is
essential to make these deals official. Before accepting the money,
initiate a written contract clearly stating the repayment terms and
mutual expectations. It will help avoid misunderstandings later on.
ALSO READ :- Must Ask Questions Before You Apply for a Business Loan…!
6 Steps to Set Up Your Franchise with Franchise Business Loans
Here are the six strategies you must implement before seeking a loan for a franchise business:
1. Identify a Business Opportunity and its Working
Capital
Unless you are about to become a franchisee of
a well-reputed and high-on-demand business, ensure to thoroughly
evaluate your prospects. If the franchise business you are planning
to start has already been rolling in your area, then you should
reconsider before proceeding further. If you are new to the
concerned industry and are fearing the risk of underperforming, then
you can try looking for other opportunities. Based on this decision,
the working capital will be decided.
2. Preparing a Business Plan
Once
you clear the first step, you must now concentrate towards preparing
a robust business plan. For example, you can consider various things
like equipment information, advertising details, infrastructure
details, etc. To reach the break-even point, invest quality time to
consider multiple things, including monthly revenue, expenses, and
profit margin. Once the business plan is ready, you will know how
much loan you need to borrow.
3. Make a Practical Decision About the Required
Amount
Most people compare how much other franchise
owners earn and start assuming they will make the same profit.
However, you mustn't forget that markets vary by location and other
factors. Plus, you need to be prepared for any losses as well. So,
make sure you are always prepared in terms of how much funds you
require for your franchise business.
4. Check Eligibility for the Loan
Your loan eligibility amount depends on factors like your disposable
income, work experience, and employment type. Additional details
include your age, citizenship, and your credit score. Your minimum
monthly salary should be above ?20,000, your age should be 22- 57
years. You must also have a minimum work experience of 1 year with
at least one month of stable employment at your current job.
5. Calculate Your Loan EMI
You must
calculate your EMI beforehand whenever you’re applying for a loan.
NBFCs like Poonawalla Fincorp offer a Franchise Business
Loan EMI calculator, where you can get details of your monthly
loan repayment schedule. Use the calculator to enter the loan amount,
repayment tenure, and interest rate. You will immediately know the
exact amount you need to pay every month and provide a detailed
repayment schedule.
6. Apply for an Instant Franchise Business Loans
Online
You can apply for an instant loan online in
just a few steps:
- Step 1: Visit the lender’s website and click on ‘Apply Now’.
- Step 2: Fill in your basic details like name, mobile number, PAN, email ID, loan amount, and tenure.
- Step 3: Upload and submit the required documents with the application form.
To Conclude
With the right planning, getting a sufficient loan for a franchise business is an easy process. It allows you to run your business smoothly. For this reason, it is essential to decide the optimal loan value and refrain from overborrowing. You can consult with Poonawalla Fincorp and get your Business Loan within a few minutes to finance your franchise business!
Frequently Asked Questions About Franchise Business Loan
1. What should I consider when choosing a
franchise loan?
While finalising a lender for a
franchise loan, make sure to conduct thorough research. It helps to
select a trustworthy lender that will provide the business
loan at a competitive interest rate and will agree to adjust the
loan term at your convenience.
2. What are the
benefits of getting a franchise Business Loan?
These
are some of the top benefits of taking a franchise Business Loan:
- Boost in Working Capital
- Improvement in Cash Flow
- Available at attractive interest rates and favourable loan terms
3. How to get approved for a franchise
Business Loan?
First, you have to draw a detailed
business plan and then approach a lender. This can be an NBFC,
venture capitalist or even the franchisor themselves. If you meet
the lender’s eligibility
criteria for Business Loan, you can submit a loan application.
The approved loan amount will be disbursed to your bank account after
successful verification.