How To Get Franchise Financing

Many individuals envision franchise ownership as a means to attaining business independence. These business systems lay the framework for anyone with even a modicum of business intuition. Franchisees provide supplies, support, and an established name so that anyone who dreams of buying into one of these many established enterprises. Still, buying into these businesses requires money. If attaining one is your goal, take into account these considerations surrounding financing before taking the plunge.

Educate Yourself

You need to assess clearly whether you can pay the bills by reviewing your Financial Disclosure Document with your lawyer or other financial experts. Investigate the potential sales for each month based on other units in the franchise and related businesses in the area. Itemize all startup and ongoing costs, including initial fees, royalties, operating costs, potential interest rates, and amortization timelines. You will need to present this information to lenders when you apply for a loan from a bank or other institution.

Assess Your Risk Comfort-Level

Risking your assets can be a nerve-racking experience Ask yourself these questions: What collateral can you put up against any financing? Will you be able to handle the loss of that collateral were you to default on the loan? If you are uncomfortable with the answer to either question, think twice about moving forward.

Write Out Your Business Plan

You will not be able to finance your operation without a detailed plan that outlines your proposed business operations. Formulate your business plan using your Financial Disclosure Document, advice from other franchisers outside your area and business plan templates supplied by your franchisee.

Control Your Outside Spending

If your credit rating is subpar, you may not be able to secure a loan or you may have to accept higher interest-rate terms. To improve your standing, first reduce your debt-to-income ratio; reduce or eliminate as much debt as possible. Consider, for example, downsizing a car that is holding you to high monthly payments. Also, continue to pay all your bills on time.

Provide Security

The more money you can provide for the down-payment, the more likely you are to secure the loan. Shoot for 20% as a minimum if you want to increase your odds, reduce your interest rate terms, and pay less over the lifetime of the loan.

Preparing to start any business requires legwork and planning. You can turn your dream of wearing a franchisee mantle into reality by serving up a plan that lenders can confidently embrace.

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