You’ve decided on your franchise, you’ve done the legwork, taken in the logistics and have considered how it will impact your life from every possible angle. The only question left is how you are going to pay for it all. If you’re looking for franchise financing, here’s what you need to know.
You Need a Business Plan
No financial institution of any sort will ever just hand you money without an outline of what you plan on doing with it. Business plans are the backbone of any successful business. Your franchisor should offer assistance in constructing a plan that will satisfy all of your lenders criteria and ensure that you get the funds.
Fill Out the Application Completely
Lenders love paperwork, it keeps them in the black and helps to assess which potential borrowers are bad risks. If you want to avoid being declined for your financing then you must complete their forms. Any information that is missing, no matter how trivial, could be the obstacle that stands between you and the franchise opportunity of your dreams.
Identify Weaknesses
Your lender is not naïve. They see hundreds of loan applications cross their desks each day. If you want to distinguish yourself from the rest then you will have to be realistic in the scope of your business. One thing that will be of vital importance will be to identify any potential weaknesses facing your business. Contrary to popular opinion this type of disclosure will not hurt your business. In fact covering the downside, will show your lender that you have taken a realistic view of your businesses and understand what can be improved upon.
Don’t Get Greedy
All too often people get carried away in the sums of money they seek to borrow. They overstate their expenses hoping to have some cushion for any unforeseen expenses that may arise. Although this may seem practical from the viewpoint of your lender it is a red flag. Your loan should cover what you need to run your business and not a penny more.
Tell Them How You’ll Pay Them Back
Financial institutions are happy to loan business start-ups capital, once they know how and when the money will return to the bank coffers. This is a key step that many tend to downplay as they may not fully grasp how they will pay the loan back. Sitting down with your expense sheet and extrapolating repayment dates will go a long way to earning your lender’s approval.
Relax
The loan process takes time. There will be meetings to discuss details of your business plan, loan application and credit history. After so much inquiry, you may start to feel like you’re living in a fish bowl. Your lender is going to go over your information with a fine toothed comb to make sure you are a suitable candidate for a loan. The process is tedious but well worth it for both of you, they don’t want to be stuck with a bad loan and you don’t want the headaches that come with dealing with collections agencies after you realize that you over borrowed. Have patience and be cooperative and you may hear your lender say, “You’re approved.”