How to buy a franchise with no money

28.04.2023 Update: 28.04.2023

Many entrepreneurs dream of owning a business that would allow them to have freedom and financial security. However, it is a well-known fact that many business ventures can fail in the first year or following ones. That’s why many people consider franchising. A franchise system that has many years of experience and provides numerous ready-made business solutions can be a great choice for entrepreneurs of all backgrounds.

Entrepreneurs that are determined to acquire a franchise can stumble upon financial requirements that can often be rather high. Not everybody has enough funds for investing. So, how can ambitious entrepreneurs buy a franchise with no money? Fortunately, there are a lot of options available for them. Let’s take a look at them in this article.

How To Own a Franchise With No Money?

Any business requires money. The same goes for a franchise. There is a lot of money involved in setting up and operating a franchise. The initial investment and ongoing fees vary from brand to brand. However, there are some ways to secure funding and put funds towards becoming a franchisee of a preferred parent company. If you’re interested in entering a franchise system with an established reputation and ready-made business model, then consider financing options and choose the one that fits you the most.

What is a Franchise?

A franchise is a business venture operated under a well-known brand name. Usually, the franchisor shares technologies and solutions that are necessary for successful operation. A franchise owner pays up startup costs and ongoing fees to set up an enterprise and get assistance and marketing support throughout all years of operation. A franchise is a great business venture for entrepreneurs that want to quickly and well-prepared enter the market and make good money.

What are the Costs of a Franchise?

The initial investment for each franchise varies from one company to another. There are franchise options for under $50,000, and more expensive options that can reach millions of dollars. Franchise owners need to pay a one-off franchise fee. On average, it is about $10,000-$80,000. There are also some fees involved. A royalty that must be paid once a month, it is approximately 5-12% of a franchise revenue. And, an advertising fee that is put towards ensuring that a franchise receives proper promotion, it is about 1-4% of gross sales.

There are also associated expenses, like equipment, insurance, supplies, inventory, employees’ salaries, licensing, and so on. While acquiring and managing a franchise is less expensive than starting an independent business, it is still a pricey affair. Entrepreneurs should be prepared for it.

How to Get Money for a Franchise

Let’s look at some ways of securing financing for your franchise.

Franchisor Financing

There are some brands that offer partial financing to potential franchisees. Carefully review all franchise options that you’re interested in, and find out whether the parent company offers financial support and to what extent. Many franchisors comprehend that not all entrepreneurs have the budget to acquire a franchise unit, and are ready to help them. However, all candidates must prove that they are reliable and dedicated. They usually ask to put down some kind of payment, so they know you’re committed.

Traditional Bank Loan

You could always consider conventional lenders, i.e. banks, that can provide small credits to get you started. Usually, candidates for a loan have to meet some requirements that the bank sets up. An excellent personal credit history and credit rating with banks are essential criteria for consideration. It is a great solution for potential franchisees. As banks usually are more inclined to issue credit for the franchise than for an independent enterprise. A franchise system that is thriving financially and has wide recognition would be a priority. Brands with lesser recognition might not receive good appeal.

Small Business Administration (SBA) Loans

SBA is a government entity, it does not directly offer financing, but instead ensures that entrepreneurs get loans from banks that cooperate with the program. It is a great option for entrepreneurs, as SBA offers lower interest rates and longer term of return than any other organizations. When SBA backs up borrowings from banks and credit entities, entrepreneurs get a better chance of getting it. It helps to have a good credit record as well.

Home Equity Loans

Entrepreneurs can leverage a home equity of credit and have liquid capital on their hands. The worth of home equity can get you a necessary loan for acquiring a franchise unit. Generally, it is not possible to leverage a loan for entire home equity, but partial. It might be a viable option for entrepreneurs that couldn’t get other forms of financing. Bear in mind though that if you consider a home equity, you put your house at risk. Because if you overdue your payment, you may lose your property.

Rollovers for Business Startups (ROBS)

ROBS gives entrepreneurs an opportunity to withdraw money from their own retirement fund. You do not need to turn to a lender, instead you cooperate with a ROBS operator that can help you quickly gain access to the funds for a one-time fee, which is usually very small.

Partnerships

Bringing in a partner is another viable option for entrepreneurs. You may not have enough funds to acquire an enterprise, but there are some people that have. It can be a relative, a friend, or a good acquaintance. Partnership might be a good idea, as it lets you quickly obtain necessary funds and get started. There exist different kinds of partnership. There are silent partners that act as investors, and you’re the one that bears all responsibilities and in charge of all daily operations. There are also partners that you can share responsibilities with, so you become co-owners of a franchise. Not every parent company can agree to this, so it is better to discuss this possibility with the franchisor and see if it's available.

Low cost franchise options

While many franchises call for significant sums of cash, there are options that are easy on your wallet. If financing choices listed above are not suitable for you, you can always consider cost-effective franchises. Cheaper franchises do not necessarily mean that they are bad in some ways. Just the opposite, it may be brands that only started operating, or just companies that do not require as much for providing goods and services. There are a lot of promising cheap franchise opportunities in all market segments available for acquisition. Typically, you can discover franchises for no more than $30,000.

Take a look at low-cost franchises available to you:
Cheap Franchises.

Conclusion

Above you can see the most common and effective ways that can help you get the necessary funds for acquiring and operating a franchise. If you’re determined and committed to becoming a part of a franchise system, then consider them. There are numerous available franchise opportunities when you have no money. Explore all options and decide what’s best for you.