Franchise financing dips, still viable option for entrepreneurs

Jessica SarterFranchise Finance

The franchise industry has been steadfast in the face of economic diversity in the years following the Great Recession. Many experts attribute this success to the elevated support, both financially and with respect to immediate visibility among consumers, that franchising comes with. As several different franchise industries, including quick service restaurants, give entrepreneurs a chance to further boost revenues by becoming members of a bigger team.

Identifying tangible franchising benefits
TIME recently explained several methods of determining if a small business could benefit from franchising. According to the news provider, the choice is largely contingent upon the specific business model, as some will simply not fit the mold of a bigger corporate. The source focuses on businesses becoming franchisors, and noted that virtually any type of business can spread to new locations and create a larger brand.

Business owners must first ensure that their business has been profitable and agile enough to compete in several different locations. Hyper-localized small businesses might not be the best candidates for franchising, as their appeal might be too closely tied to the first market they competed in.

Time added that a unique appeal is essential to succeed in a variety of locations and markets. Further, entrepreneurs should sift through existing franchises to see if their business model could fit into an overarching corporation. Franchising is most beneficial at the startup phase, as business owners get the benefits of an already-existent visibility and often guidance from the franchisor.

Index shows decrease in franchise financing
The latest IFA/BoeFly Franchise Lending Index revealed that credit tightened in September, as loan disbursement volumes dropped 2.11 percent from August’s figures. The firms noted that this represented the first year-over-year decrease in eight months, falling just over 2 percent from the same period last year.

“The drop in the Franchise Lending Index is a reminder to franchise executives that they need to be proactive in helping their franchisees through the financing process, and those that do not will likely face slower growth,” Mike Rozman, co-president of BoeFly, said in a statement.

Despite this drop, franchisees can improve their chances of acquiring the loans they need by using BoeFly. This firm only requires one loan application, and has thousands of participating lenders that will compete for the borrower’s contract. Complex algorithms ensure that only the best-suited lenders are matched with franchisees.