A Beginners Guide to Franchise Funding
There are numerous ways to attain franchise funding for the launch of your franchise but you need to accomplish a few things before you search for money. Before you even discuss finances with a lender, you want to make sure you are prepared. Lenders seek out reliable and stable individuals with decent credit scores and transparent business plans.
Where to Start With Franchise Funding?
The first step is determining your own net worth which is calculated by subtracting your liabilities by your assets. The amount of income you earn is important, but how you spend your money is equally important. If you are unable to manage your own finances, lenders are far less likely to trust you with their money in fear that you will not be able to manage theirs. Lenders will additionally look at how you have dealt with previous finances including paying off debt. Make yourself appear as reliable as possible by reaching out to your credit bureau and fixing any misleading information will improve your chances of getting approved.
Craft Your Business Plan
Once this is complete, you can begin to craft your business plan which is a key factor in the lenders decision to approve or decline your loan request. Making a plan that lays out exactly what you are planning to do will be extremely advantageous in the long run. This should include your financial information, a marketing plan, and projections. Once you have organized all you information in an appealing way, you can approach a lender.
Franchisor May be Able to Help
It is wise to start with the franchisor as most offer franchise funding, but all franchisors are different. Some may offer loans based on simple interest with a large payment years out, where others may require no payments at until after a year. Finding out if they have agreements with leasing companies will significantly help you in funding the franchise. Keep in mind that the franchisor wants their business to expand, and you have negotiating power.
Additional Financing Needs
In most cases, additional funding will be needed even after you receive financing from the franchisor. Some alternative funding options may include family, additional home mortgages, bank loans, or SBA loans. SBA loan guarantees can be a viable option when banks are hesitant to work with you. Taking out a second home mortgage is another option but you must decide if you are willing to put your house at risk in order to finance your dream franchise.
Franchise funding can be obtained in various ways including through the franchisor, family, SBA loans, or additional mortgages. In order to get approved, you have to be willing to compile your information and create an organized business plan. Focusing on transparency and stability will be beneficial when it comes time to approach a lender.
