The franchise business in India is growing rapidly. As per a recent report, this segment is expected to reach Rs.10,500 billion by 2022 with a CAGR of 24%. A franchise offers flexibility to small business owners and supports the infrastructure of large organisations. However, opening a franchise involves substantial capital investment.
Therefore, entrepreneurs or established businesses can simplify the processing of financing a franchise business in India with these popular funding options. Selected financing options also accompany tailored online tools to streamline the repayment process like a business loan EMI calculator.
Top 7 funding options for franchising your business
Choosing the right credit option is the secret of matching the right financing for a franchise. Following are the options individuals can consider:
- Franchisor financing
The first viable funding option entrepreneurs can consider is contacting the prospective franchisor. Selected corporations with this business model extend financial solutions for their franchisees. They do it either through a partnership with selected lenders or from the corporation itself.
However, in most cases, the credit available covers only the franchisee fees.
- SBA loans
The Government of India also introduced several Small Business or SBA loan schemes to help the ventures of this particular stature. These loans are similar to traditional business loans. However, in this case, the lenders are incentivised by the Government, and therefore they offer sizeable credit with reduced interest rates.
However, this advance usually comes with a cap on loan amount and certain stringent eligibility requirements. Hence, this can be a potent funding option for opening a franchise for those with financial chops and required credit scores.
- Venture capitalist
Besides, you can also approach a group of investors to build your business brand. It also includes angel investors. They are usually a group of successful business owners and invest in ventures offering rewarding business opportunities. Besides, individuals can also seek venture capital from investors who invest in funds used to buy stocks of different private companies.
However, in such cases, the borrowers need to justify the credit requirements. The loan amount is decided after analyzing the success ratio of the franchise. Additionally, the repayment tenor and interest rates need to be agreed upon with lenders.
- Alternative lenders
The aspiring business owners can also opt for alternative lenders to raise funds for their franchise. Usually, these lenders impose less stringent eligibility criteria and quick loan processing timing. Additionally, they also offer a host of credit like term loans, equipment financing, line of credit, etc.
However, alternate credit products are expensive, considering the accessibility and convenience they offer. Moreover, they also accompany higher interest rates, hefty additional charges and shorter tenor. You can also compare the interest rates with other traditional lenders using a business loan EMI calculator to seal a better deal.
- Traditional loans from financial institutions
One of the most common and safest ways to secure credit for a franchise is a dedicated business loan. Unlike alternative lenders, the business loan interest rate in India from reputed financiers is competitive.
Moreover, selected NBFCs like Bajaj Finserv also offer sizable loans at simple easy-to-meet eligibility. Moreover, the business loan from this financial institution comes with a longer tenor, reducing the EMI burden. You can also access a business loan EMI calculator to estimate the monthly installments and interest payable.
Besides, this NBFC also offers a Flexi loan facility, which allows borrowers to withdraw cash multiple times in a day from a pre-sanctioned limit. Moreover, they have to pay interest only on the amount utilised or withdrawn.
They also extent pre-approved offers that streamline loan processing. These are available on several credit products like business loans, personal loans, etc. Enter your name and contact number to check your pre-approved offer in seconds.
Individuals with poor or no credit history can also consider crowdfunding. They can set up their own crowdfunding page or approach organisations that propose financial assistance to prospective businesses.
However, individuals need to have a good reach, great convincing power, and an excellent business plan in this case. Even after that, they may fail to raise a sufficient amount for their franchise business. Moreover, these funding organisations offer credit only to selected business types and franchises in that case.
- Credit from family and friends
Last but not least, individuals often borrow from their family and friends to build a business. They can also consider this option while looking for funding avenues for franchises.
While this option may sound great initially, they often lead to friendship loss and family disagreement. Additionally, the amount raised as gifts or as a loan is not always sufficient to cover the cost of opening a franchise.
However, if you still want to borrow from your close groups, you should make a contract that includes repayment pattern, tenor and other expectations.
Hence, after assessing these options, you can choose the best financing option for a franchise business for you. However, in case you opt for a conventional loan, do not forget to use the business loan EMI calculator for better debt management.