Many small business owners balk at the overwhelming statistics facing new small businesses: 33% will fail within their first two years, and 56% will not make it past four. Many go under the common notion of thirds – that one third of small businesses will make money, one third will break even, and the last third won’t ever break outside of a negative earnings scenario. Still seeking to run their very own business but fearing these odds, many will then turn to opening a franchise, which still requires franchise loans.

Franchising is, in essence, a similar alternative to opening a series of chain stores. Whereas a single company seeking to expand will open up a chain of stores using their own funding, employees, marketing, etc, a franchisor expands their brand by giving all of these responsibilities to a prospective franchisee in return for permitting them full use of their trademarked name, marketing along with other business aspects unique to that brand. If a franchise fail, this frees the franchisor from personal loss given the absence of a direct share in its success.

Nevertheless, this can be a lucrative proposition for an entrepreneur since the already established success, and people’s preexisting understanding of the brand and marketing help assure a certain customer base, making for a a lot more sure bet as compared to starting a completely new independent business. In a nutshell, a franchise is a brand name establishment that is independently owned and managed by a third party under permission and guidance from that franchise’s parent corporation.

However, because the entrepreneur is essentially buying permission to use a brand name, as well as a recognised business model from a large franchisor, they still must put personal financial stake in the operation which can be acquired via franchise loans.

Franchise loans resemble just about any other type of business loans in that they’re granted by a lender for use in establishing a company with the business owner’s intention of repaying the borrowed funds. The size of various franchise loans will certainly vary with respect to the brand of the franchise an entrepreneur is looking to open, some of which are vastly cheaper than others.

Subway restaurants, for instance, are perhaps the most favored franchise in the United States, with a startup cost ranging between $84,300 and $258,300. However, a 7-11 can be opened for as low as $40,500, while a Hamton Inn can cost around $13,148,800 to open. Of course all of these startup costs rely on an array of factors ranging from geographical location, to size and scale of the establishment, to the economic climate of the area where their opened. No matter what, even cheaper franchises cost a significant amount, making franchise loans more than necessary for the common entrepreneur.

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