Top Three Sources of Franchise Funding Remain Consistent Over the Past Year
By: Michael Alston for Franchise Insights
December 11, 2024 — While the rankings of many of the categories of expected business startup funding changed over the past year, the top three – personal savings, SBA loans, and banks or other loan providers remained the same.
Franchise prospects said they expect “personal savings” to make up the majority of funding for their business launches, as cited among the top three sources by 51.3% of respondents in a November 2024 survey. Those planning to take advantage of Small Business Administration loans and bank loans stood at 40.0% and 36.3% respectively. Another 20% of respondents are hoping to take advantage of in-house financing by the franchise that they seek, tied with 20% who expect to tap their retirement savings.
The rankings for the top three sources are in line with data from November 2023, when “personal savings” was the most often source selected, at 44.8% of respondents, followed by SBA and bank loans.. Similarly in July 2024, personal savings was at the top of the list of franchise funding sources at 51.3%.
The category of “home equity line of credit” grew the most from November 2023, rising from sixth to fourth place with a gain of 11.1 percentage points (more than doubling) to 18.8%. Also almost doubling, growing by 8.6% to 20% was “in-house financing from the franchisor” cited by 20% of respondents. “My retirement savings” grew by 7.6 percentage points to 20% of respondents.
These results are according to surveys of aspiring business owners conducted by FranchiseInsights.com in November 2024. The total percentages above add up to more than 100% since respondents were instructed to choose their top three sources.
The “other” option was chosen by 8.8% of respondents. The top “other” sources cited were as varied as “gifts”, “employment income”, “grants”, “inherited IRA” and “sale of home,” among many more.
Funding remains a top concern of aspiring franchisees, as 67.2% cite it as a key startup concern in the November 2024 Small Business Startup Sentiment survey, though 41% of respondents think that financing will be easier three months from now (February 2025).
FranchiseInsights.com conducts a monthly “mystery shopping survey” as well as the Small Business Startup Sentiment Index™ (SSI) of individuals who have recently inquired about businesses for sale. The most recent Startup Sentiment Index™ and “mystery shopping” surveys were conducted in November 2024. Responses related to franchise funding were collected from both instruments.
Franchise Ventures is the leading franchise lead-generation platform for potential franchisees to thousands of growing franchise systems in the United States and Canada. Its franchise lead generation brands include Franchise.com, Franchise Solutions, Franchise Gator, Franchise Opportunities, Franchise For Sale, SmallBusinessStartup.com and BusinessBroker.net, and together they provide the largest aggregation of prospective franchise buyers in the U.S.
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Published on Monday, December 9th, 2024.