Interested in borrowing money for your franchise? There are some ways to ensure a better chance at securing franchise financing when looking to investors or lenders for support.
Finance your franchise with the following tips:
Become an Expert on the Franchise
Make sure that you know all there is about the franchise you are considering buying; what is the history? How about the operating costs and expenses? Whether you are looking at an existing franchise or a potential location for a new site, do your research to learn all that you can. This will be useful when drafting your business plan and when meeting with prospective lenders or investors.
Review Documents with an Expert
Always review your Franchise Disclosure Document, or FDD, with someone who is knowledgeable, like an attorney or your accountant to glean insight into details about startup costs, the owners, and any pertinent information, including any legal issues, of the franchise. This is considered one of, if not the most, important documents of this transaction.
Draft your Business Plan
Anyone that is planning to invest or loan money to you for a franchise will want to review your business plan. A well-done business plan includes details about what you plan to do, sell, your marketing strategies, cash flow, and financial projections. Enlist help from an industry expert if you have never completed a business plan previously; it is a very important task that you will revisit frequently over time.
Work on your Credit
The better your credit score, the more options for financing you will have. Pay off current debts, pay down credit lines, and pass on big-ticket items until your rating improves or you have secured financing for your franchise. Your rating relates to the interest rates and terms that you will be offered, too.
Have Some Collateral
Be prepared to have collateral on-hand for your franchise. It is not uncommon for potential lenders to request 10-20% of the purchase price as a down payment for your franchise. This shows that you are vested and serious about the business.
Use these tips to make an impression on potential lenders and investors when looking to finance your franchise opportunity. Got other questions related to your business venture? Talk to the industry experts at Impact Commercial Capital to learn more.