What are the interest rates for franchise loans?

Interest rates for franchise loans can vary widely depending on factors like the type of loan, financial institution, applicant's credit profile, and loan terms. Here are the common factors that typically influence interest rates:

• Loan Category: Rates vary based on the loan type - traditional business loans, equipment finance, working capital etc. Government-sponsored schemes may have the lowest rates.
• Applicant’s Profile: A good credit rating and financial track record attract the most competitive interest rates from a loan provider. Typically, startups are charged higher rates.
• Tenure: Longer duration loans may accumulate greater interest despite having marginally lower rates. Short-term loans have higher rates but lower total outgo.
• Applicant Profile: Established businesses get lower rates due to steady operating cash flows. Startups and first-time franchisees are charged higher rates to offset risk. Franchisor reputation also impacts rates.
• Franchise Standing: Rates depend on brand equity, unit economics, and success ratio. Established QSR franchises receive cheaper capital than new, unknown brands.
• Economic Environment: Interest rates tend to decrease during times of strong economic growth when borrowing is high. However, during economic downturns and recessions, rates usually increase to reflect the higher risk of defaults.

Analysing both rate and repayment capacity is prudent while opting for franchise loans.