Franchises open a clear pathway to business ownership with established systems and processes. The upfront cost is an obstacle for some desiring to jump into the game. Here are things you can do to secure the money to start a franchise.
Work on Your Credit
Bad credit is the number one killer of securing financing. Good credit positions you for so many opportunities that improving your credit score should take priority at every stage of business operation. Sign up for credit monitoring services to keep an eye on your score. Take necessary steps to raise your score, such as keeping payments current, eliminating debt, and delaying large purchases.
Start Saving Cash for Collateral
A minimum 10% down payment is standard for many loans, but the actual percentage depends on your creditworthiness and the institution you work with. Significantly improve your chances for approval with a larger down payment.
Research Pertinent Details
Get to know all of your options for financing possibilities. Find what types of loans are offered on the market and the standard structures. Know the terms and conditions of default. Identify what you can offer as collateral. Calculate the total financing cost, including fees and interest rates. Then factor those numbers into your operating costs. Pay special attention to cash flow over the first six months of operation to avoid a quick crash.
Examine the Franchise Disclosure Agreement (FDD)
The FDD shares vital details you need to start your business. The FDD shares how to contact current owners, the support you can expect for marketing and operation, and the total startup and operating costs. Of particular interest is if there is a lawsuit past, present, or pending. Because of the essential nature of the information in the FDD, examine the contents with a lawyer and accountant. Don’t be blindsided by unforeseen challenges because of not studying the document carefully.
Craft Your Business Plan
Lenders look for a solid business plan before offering a loan. Line out a comprehensive business plan to show you are prepared to flourish. Share the location and past performance of the business if you’re taking over an existing franchise. If starting a brand new operation, detail the startup and operating costs for the lender.
Give realistic financial projections. You can promise the moon to a financier, but they’ve heard it all before. Make sure the plan accounts for weathering any hiccups or inevitable setbacks.
Franchisees are well-positioned to create steady income. Securing a good loan can get you on the path.
