When seeking money to fund your franchise, certain considerations should always be taken into account. Acquiring franchise financing does not need to be complicated, but your application is likely to be rejected without proper forethought. Here is everything you need to know to make the process work in your favor.
Understand the Basics
Having a thorough comprehension of the lending landscape is essential. Research how much a loan should cost, including interest rates, initiation fees and miscellaneous add-on expenses. Decide what assets you are willing to risk, as loans typically require collateral. Know how much you should expect to pay monthly and the consequences of defaulting. Make certain all numbers conform to reasonable cash flow expectations.
Research Your Company
Lenders want to know that you have done your homework. Be prepared to answer questions about the franchise you plan on operating and how much the startup and operating costs will be, as well as the proximity of similar stores surrounding your proposed location. The more familiar you are with these matters, the better of an impression you will make.
Review Your Franchise Disclosure Document
Along with your attorney or accountant, review your FDD. The information gleaned from this essential record is the most important you can absorb. When introducing yourself to a lender, the ability to display an awareness of the knowledge contained therein will place you in a positive light.
Create a Business Plan
Having a written proposal to hand potential creditors helps to show you are prepared to handle the responsibility of running a franchise. Lenders will also appreciate the convenience of being able to refer to printed materials after you are gone. Quick access to numbers and every other detail concerning your plan makes it easier for lenders to argue in your favor.
Fix Your Credit
A bad score can put a stop to any loan application. Keep yours in good standing by paying bills in a timely manner and never overextending yourself financially. Examine your report and challenge any mistakes with the crediting agency, as bankers are guaranteed to question any negative activity.
Have Collateral Ready
In order to secure a loan, a down payment between 10% and 20% is typically necessary. Having cash immediately available proves your seriousness and gets the money train rolling. Always remember to take your checkbook with you when embarking upon a visit with a lender.
Obtaining franchise financing is not tricky. However, the wrong approach can easily create a negative outcome. Make smart moves when asking a bank for capital to sustain your burgeoning operation.