So, after all the careful research and planning, you’ve finally made a decision. You’re going to buy a franchise and go into business for yourself. While this is a momentous occasion for you, you’ve also reached your next big step: finding a loan.
The best way to ensure you get a loan for a franchise is to choose the correct franchise. While you may be a big fan of a certain franchised restaurant, choosing a more established or popular option will make you more likely to get your own. Banks are more willing to gamble money if they know the name and know it’s likely to succeed. Plus, many franchises will direct you to banks that will give you a better shot.
In addition to the company being stable, the bank needs to have faith in your ability to run your franchise. Even the most stable brand names can fail if they are run improperly. When you go to get a loan, it is important to not only look and act like you know what you’re doing; you also need to have done your research. You need to go into the office proving you understand the market you’re getting into.
A solid business plan is essential. This includes costs, expected profits, market research, and specific information on your franchisor and their specific requirements. A bank is much more likely to give you a loan with a solid business plan, not only because it puts proof right in their face that you’ll likely to make money and be able to repay, but it also shows that you’re dedicated, and know exactly what you’re diving into.
If you’re looking for a loan, it’s always a good idea to look around, and ask around to find the best option for you. Not only can you talk to different banks, you can also talk to different franchise owners – especially if they are with the same company you’re considering. Many times you will find there are “franchise friendly” banks that are not only more likely to give you a loan, but may also give you a better rate.
When looking for a loan, the banks you’re asking money from are using risk to determine whether or not they should loan to you. To increase your changes of receiving a loan, take steps to lower your risk. A great way to do this is to get your loan insured by the Small Business Administration (SBA). They will guarantee to pay a portion of your loan if you are unable to. While you may have to do some work to get this insurance, it will drastically increase your change of getting your loan.
While getting a business loan is essential to starting a franchise, many companies and banks will require you to start with a certain amount of capital that is not a loan. Depending on the company, this could be a substantial amount of money. Research this carefully when shopping for franchisors; and it’s never a bad idea to start saving money now.
