You have found the appropriate type of franchise business to start, carried out all your groundwork, and are now determined to make your dream franchise business come true. However, the process of turning your business dream into reality is not always an easy thing to do. Before signing any kind of franchise agreement, you will have to have some cash in place for financing your franchise business.
Getting funding for a franchise business can be an appalling thing, even for people with excellent credit. Whether you are looking to borrow from a bank, SBA or any other private lender, you will experience an onerous assessment based on the following criteria.
How Much Credit Score Is Required?
Banking institutions and franchise companies evaluate your credit history as it provides them some indications about your creditworthiness and your ability to manage the finances. In many instances, you will be expected to have at least 700 of credit score so that you can even apply for the funding. In case you have less than 650 credit score, the borrower will usually need to present a reason for bad credit history.
What Type Of Collateral To Provide?
In most cases, the lender will ask you to provide collateral for getting a franchise loan. Due to the fact that lenders are putting money down at risk, they want to see that you have a mortgage on your own home or some other resources that can help the repayment process if required. However some lenders will not ask for collateral for franchise financing.
How Much Your Own Cash Is Invested?
Lenders will need to see if you have a savings and are able to place your own cash against the loan. The average amount that a borrower needs to put down is 20% of the overall loan amount.
How Does The Lender Evaluate The Borrower’s Eligibility?
Business lenders will pull a background check to evaluate your potential as a franchise owner. It is usual to take a look at your business work and your management experience to determine how you’re qualified to manage and run a franchise business.
What Are The Benefits Of Financing A Franchise Business?
- Funding up to $500,000
- Completely unsecured funding
- Quick funding process
- Good credit is not required
- No personal guarantee required
- 90% approval rate, approval in one hour
Some Tips On Funding
In case you have experienced some financial problems; however are still confident to pursue your franchise business dream, don’t lose hope. You still can get a loan, even in case you have a bad credit score.
Before you apply for a franchise financing, you need to work on clearing up glitches on your credit report, if any. There are credit rating agencies that can help resolve mistakes on your credit report. Additionally, try some different methods to reduce your personal finances, for instance, refinancing your mortgage, in an effort to save up and pay back the debt.
One additional tip is to pick a franchisor that has good financial records. There is a good chance a business lender will approve you if they trust the brand and the brand has a good repute of running and managing profitable franchises.
There are some other ways of getting funding for your business and the other ways of getting a loan should suggest operating with a business partner, funding from angel investor, cash advance. It is very important for you to have a strong business plan before you start looking for a loan. Business lenders will need to know that you did all the groundwork to make sure that you have a detailed sketch of financial projections and the way you will make repayments. In case you’re interested in getting more information about your alternatives for borrowing cash, you need to contact franchise specialists in your area.