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The established success of a well-known franchise can make it easier to secure financing. However, you will still need to be prepared when talking with a lender. Getting turned down for a business loan will put a wrench in your plans to start your own business, so prepare your paperwork before heading to your meeting so you can present yourself as a competent and intelligent business owner.
Check Out Your Credit Report
The lender will investigate your personal credit score when considering whether to fund your franchise plans. Try pulling up a copy of your credit report before you meet with the loan officer. The report will show your job history, your bill payment records and other important financial details. You can receive a free or affordable credit report from AnnualCreditReport.com. This is a government program that will send you the information you need from all three credit bureaus. Check the reports over for incorrect marks against you. You can file to have these removed for free, improving your credit score without requiring a lot of money or effort.
The lender will look for these markers of financial health:
* Collection requests for unpaid bills * Bankruptcy filed in the last seven years * Steady job history * Extensive applications for credit in the past two years – too much borrowing indicates cash flow problems * Debt that exceeds 50% of your current credit limits
Write a Cohesive Business Plan
No lender will extend financing for a franchisee if you can't present a credible business plan first. It demonstrates to the lender that you have done proper research and that the market will support your business.
A great business plan will include:
- A clear explanation of the concept behind the franchise
- The legality surrounding your type of business
- Descriptions of the products and services you will use to produce profits
- Examples of other successful businesses from the same franchise
- Location details
- A marketing plan that is tailored to your specific area
You may be able to request a business plan kit from your chosen franchise. This will take a lot of the work out of the process, but you will still need to do research on your market and area. The local Chamber of Commerce will be able to help you with this. The Small Business Administration can also provide you with clear guides and resources for creating a winning business plan.
