Taking out a franchise loan is not always as cut and dry as other financing pursuits. Before you commit to a high-interest lender or terms with a franchiser that may not be in your best interests, here is what you need to know before securing your loan:
Evaluate Your Worth
Do you know your company’s net worth? This is important to secure financing for your franchise. Total up all your assets and subtract your liabilities to find the amount of your net worth. Don’t worry if some of your assets are not paid off as this is reflected in the amount that you owe. This will be helpful moving forward with finding a lender.
Have a Plan
A business plan is a necessity and shows potential lenders how you plan to pay for related costs beyond the initial franchise loan that you are seeking. A solid business plan can override other shortcomings in your loan application, such as a low credit score. If you need help composing your business plan, check out online templates and tutorials.
Assess Your Cash
Try not to spend all your cash in opening your franchise. Some suggest that franchisees never spend more than ¾ of their cash reserves on this initial investment, but this may be contingent on your actual net worth.
Be Wary of Franchisor Financing
It may be tempting to accept the franchisor’s offer for potential funding but review the terms carefully. Some franchisors are eager to make the sale and open the locale; make sure that the loan conditions work for you now- as well as later on.
Consider Unconventional Lenders
Before committing to a conventional lender or bank, consider other ways to finance your franchise opportunity. For example, consider online loans that require less documentation and that have a faster turnaround time. Plus, some of these online lenders have less rigid application requirements.
You may consider a variety of finance options to fund your franchise opportunity; talk to the money professionals at WCK Financial to learn more today.