Second Mortgage

Second mortgages give franchisees one lump sum of cash, which can be used for any purpose. Second mortgages are approved for self-employed people more often than other types of loans, making them a great option for franchisees. Since the loan is secured by real estate, interest payments are often tax deductible (check with a tax advisor for details).

Second mortgages generally range in length from 10 to 30 years. Some programs have pre-payment penalties, meaning that extra fees are charged if the loan is paid off too soon after the term begins. Other programs have large payments—called balloon payments—due at the end of the term.

Since there is a set amount of money involved with second mortgages, they are often employed for a specific purpose or purchase. The expenses associated with buying a franchise are significant, and a second mortgage is one way to cover the costs.