Franchise Financing Tips: How to Get Money to Open a Franchise
Opening a franchise can be an excellent opportunity to be your own boss and earn a sizable income. You will need some startup capital in order to get going. If you do not have a lot of savings or someone who is willing to finance your venture, you will most likely need to take out a loan. Here are some tips to help you figure out how to get financing to open your franchise.
Calculate Your Net Worth
Before you approach a lender to take out a loan, you will need to figure out your net worth. This is all of your assets (cash, checking and savings accounts, real estate you own, any automobiles that may or may not be paid off, bonds, securities, insurance policy cash value, and any other assets you may have) minus your liabilities (mortgages, auto loans, commercial loans, and other debts). Knowing your net worth will help you figure out how much capital you have to work with and how much you will need to borrow.
Improve Your Credit Rating
The next factor that lenders will consider is your credit rating. Lenders will look at your stability, income, and track record. A lender is more likely to loan money to someone who has lived at the same address for several years and has had the same job for a relatively long period of time than someone who moves around a lot. A lender will look at your ability to live within your means. If you do a good job of managing your personal finances, you are likely to also do a good job of managing your franchise’s books. Lenders will check to see if you pay your debts on time or have any delinquent accounts.
Before you apply for a loan, you should get a personal copy of your credit report. This will give you the opportunity to identify and correct any errors so they are not used against you and do not delay your loan application. You will also have the chance to resolve any outstanding bills that are overdue.
Create a Business Plan
The next step is to create a business plan. This is a critical piece of your loan application that can mean the difference between getting approved or denied. It should include a technical study of your business, pro formas, projections, cost analyses, working capital estimates, and a marketing plan. Your business plan should also have a certified statement of your net worth and credit references.
Consider a Loan Guaranteed by the Small Business Administration
If you apply for a loan but the lender does not want to give you one based on your financial profile, you might be able to get a loan if you get a Small Business Administration guarantee. An SBA-guaranteed loan is guaranteed for up to 90 percent of the value. You will need to submit a loan application to the lender. If it is acceptable, the lender will forward the application and its credit analysis to a local SBA office. After the SBA approves your application, the lender will close the loan and distribute the funds. You will make payments to the lender.
Franchise Opportunities with Between Rounds
Between Rounds has a chain of successful bagel shops all over Connecticut. Opening a franchise of your own can offer you the opportunity to earn a substantial income by selling products that customers already know and enjoy. We have a successful business model that you can use to start and grow your own franchise. Contact us to learn more about franchise opportunities.
This article is intended for informational purposes only. Between Rounds is not a financial advisor or lender. You should always seek professional guidance before applying for a loan or attempting to start your own business.