You’ve decided on a franchise and are working with a franchisor to get it. As you move closer to hanging your sign, each new step is exciting and new. Your franchisor will provide operational coaching and guidance as you progress, but most financial concerns depend on your financial situation. Are you prepared for your franchise loan approval?
A corporation’s financial preparedness is a subject in and of itself. Most buyers don’t have enough money to cover all of their living expenses for a couple of years. Even if you have access to non-traditional sources of funding, most franchisees are required to secure traditional sources of funding. Even if you’ve taken out loans in the past, it’s still nerve-wracking to approach lenders in the early stages of a business.
New franchisees seeking loans should prepare their finances before franchisor approval. Traditional lenders (including SBA lenders) will evaluate your worthiness without a track record of success. You’ll be ready for their inspection with a few crucial elements, notwithstanding their risk.
A Great Credit Rating
A good credit score shows that you have successfully used credit and consistently paid your debts. To be considered a viable borrower, you should have a credit score of 700 or higher. Make sure you pay your bills on time and keep a good credit rating.
Tax Document Readiness
The lender sees what the government gets. It’s best to have at least two years of history scanned and ready to go.
Available Cash Reserve
They expect you to have a stake in the outcome of the game. With collateral (like your home) or cash on hand, you show a lender that you are serious about repaying the loan.
Robust Business Strategy
Lenders want to see a clearly defined strategy for achieving your goals. It will demonstrate your abilities as a manager or supervisor and your knowledge and expertise. Lenders can see your ability to repay any loan based on your realistic, anticipated timelines for profitability.
Franchising is an excellent source of data and information that can reduce a lender’s risk. To choose this franchise, you should look at the success rates of other franchisees and the overall performance of multiple locations.
Even with all your ducks in a row, getting a franchise loan approval can be intimidating. Your franchise search deserves as much attention as the application process. Your franchise’s early success and opening are intertwined with your loan readiness. To get a loan and start your new franchise, you’ll need an organized package for lenders that highlights a strong financial foundation.
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