Loan options for first-time franchise owners in Omaha and the Twin Cities: A complete guide

A franchise offers a unique business opportunity for first-time owners, especially in growing metro areas like Omaha or Lincoln, Nebraska; Council Bluffs, Iowa; and Minneapolis-St. Paul, Minnesota. They enable aspiring entrepreneurs to build on the success of an existing company while taking an ownership role from the outset. It’s a business proposition that remains attractive. 

And if you’re a first-timer, you’ll probably need help with financing before you officially launch. While there’s not a one-size-fits-all model, there are several ways to find funding that’s tailor-fit to your business. 

How much does it cost to start a franchise business? 

If you’re considering opening a franchise, chances are you’ve already explored your choices and have a specific opportunity in mind. However, if you are still weighing your options, it’s good to know you have a wide range of pricing options. 

On the low end, some franchises are available for around $10,000. These are often home-based or mobile businesses. Household names like McDonald’s or Dunkin’ can cost a million dollars or more. According to Franchise Business Review, the average cost is around $150,000. These expenses can include:

• Upfront franchise fees
• Initial deposit/down payment for securing a lease or real estate loan
• Improvements and modifications to a property
• Fees for professional services, including accounting, legal and architectural services
• Supplies, inventory and equipment (including point-of-sale solutions)
• Furniture and fixtures
• Working capital to keep the business going until it turns a profit
• Hiring and training employees
• Insurance (health, property and liability)
• Hiring and training employees
• Advertising

If you’re not sure where to start looking for a business to franchise, browse listing sites like BizBuySell where you can search by location and industry to see what’s available.

What are the top franchise financing options?

While there are a few differences in costs between Omaha and Minneapolis (real estate and operating, for example), the most popular ways to finance a franchise remain the same. 

1. Franchisor Financing

Some companies that offer franchise options also provide financing to get started—either by themselves or working with a third-party lending company. The franchise parent company may also have preferred lenders who deal directly with franchisees to help them get up and running more quickly. 

It’s easy to see why a parent company would have a vested interest in funding franchises and offering affordable financing payments. However, it’s important to explore all your options to ensure you get the lowest-cost and most flexible financing available. Finally, as with your actual franchise agreement, it’s important and beneficial to have a 3rd party review all terms and conditions before signing the contract. 

2. Commercial Bank Loans

Commercial banking refers to banking products and services for a wide variety of business types and sizes. Commercial bank loans can provide customized and flexible financing for individuals who aren’t able to finance their franchise through the parent company (or simply don’t want to). 

When it comes to choosing a bank for commercial loans, entrepreneurs often prefer local, community banks. Why? High-touch customer service and support, competitive terms and experienced bankers with local knowledge who can be a source of guidance for lending and more. 

With bank financing, you can also use both standard commercial term loans, and loans through the Small Business Administration (more on these below). One major advantage of independent financing is that it won’t be entangled with your franchise agreement, which may enable you to improve your loan terms, pay off your loan more quickly or reduce overall costs.

Additionally, when you partner with your local bank for financing, you also gain access to other key business, including:

• Deposit accounts: checking and savings accounts
• Merchant services: point-of-sale solutions and payment processing services
• Treasury management: payables (bill, vendor and payroll) and receivables (lock box services, remote deposit capture and merchant services)
• Liquidity management: ICS, CDARS and zero balance accounts.

Keeping all your financial accounts and services under one roof will consolidate loan management, accounting and reduce the time spent on financial management. Even if you don’t need all these services upfront, a relationship with your lender can result in better recommendations and strategies to keep your business successful in the long run. 

3. SBA Loans 

With favorable terms like lower interest rates and longer repayment periods, loans through the Small Business Administration (SBA) can often be more affordable, manageable, and accessible—ideal for new franchise owners. Additionally, backing from the SBA effectively reduces the risk of taking on a loan for lenders, thereby increasing the likelihood of approval for franchisees with little business credit history.

Franchisees can utilize several SBA loan options at American National Bank, including:

• SBA 7(a) Loans: Can be used for various business purposes. These loans offer up to $5 million with flexible terms and a 10-30% down payment. 
• SBA 504 Loans: For purchasing fixed assets like real estate or equipment, SBA 504 loans provide affordable, long-term, fixed-rate financing for up to $5.5 million with a down payment of 10-20%.
• SBA Express Loans: With faster processing and a maximum loan amount of $500,000, these loans can help you gain access to necessary financing more efficiently.

ANB is also an SBA Preferred Lender. This means we have more experience with small business loans, can expedite loan processing and can increase your chance of loan approval because of our expertise. Our Preferred Lender status is one more way your franchise can start strong. 

4. Private Investors

Still need to fill some gaps in your financing? Another option is funding from a private investor. 

Private investors may charge interest, require a portion of your profits, or seek to be a silent partner—an investor who is part of your business partnership, sharing in profits but not taking part in daily management.

If you think you may need to use private investment funds, there are many investor options to choose from. Possibilities include former business partners, close friends, family members or members of the local business community. 

While accessing funds without the usual credit requirements may seem appealing, there are some drawbacks to consider. For instance, when borrowing or using funds from friends and family, if you are unable to repay this could result in damage to your relationships. Peer-to-peer platforms may have significant fees or specific rules for repayment. In either case, the funds that you can get from private investors will often not be enough to launch a franchise on their own—though they may be useful as a down payment to secure a commercial loan for your franchise.