5 Secrets to Perfectly Prepare for Financing a Franchise

Franchising offers entrepreneurs a way to become a business owner without having to figure out everything on your own. However, they require capital to get started. There are several ways to obtain franchise financing from loans to personal assets. If you are seeking outside resources such as a bank loan, there are five secrets to improve your success chances.

Know Your Credit Score

Pull your credit report prior to arriving at the bank. A higher credit score increases your odds of success at obtaining a loan with better interest rates and franchise financing terms. Find out what credit bureau the bank you choose uses and focus on what that bureau states increases your score. There are a few factors that improve your score across all three bureaus including paying off debt, keeping balances to 30% or less of the credit limit, paying bills on time and refraining from making big purchases.

Pick a Franchise

If you know how much money you have or can get, it may be easier to select a franchise. Some franchises have higher start-up and/or operating costs than others. Franchising should appeal to your interests as well. Know the information ahead of your lender meeting because they are likely to have many questions regarding the business.

Ready Your Money

Review your assets and determine how much you can put towards the new venture. Many lenders require a down payment of 10-20% to ensure that you have something at stake as well. The more money you can put down the less you have to borrow.

Review the FDD

The FDD or Franchise Disclosure Document has important information such as contact information of current owners, operating costs, ongoing support, startup costs, marketing support, litigation details and more. Not only will the FDD help you decide on the opportunity to embark on, but the information can help you answer lender questions and create a business plan to get your franchise financing.

Determine a Business Plan

A well-thought out business plan increases your chances of a lender funding the enterprise. The FDD usually has information that is helpful to include in your business plan. Anticipate for things to not ramp up as fast as expected.

When determining how you will finance your franchise business, consider all the associated costs and how much money you can put down. Repayment of financing, loan terms, interest rates, financing fees, operating costs and the terms and conditions all need to be looked at prior to committing to anything. Franchise financing offers a lot to entrepreneurs. Increase your odds of successfully obtaining financing with these five secrets.


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