Securing Franchise Loans

2007-03-08 10:33:40

( Financial )



Franchise loans are granted if certain criteria are met. A lender will look at specific information before approving franchise loans. This will include your credit history including your payment track record and past loans. Your ability to provide a collateral and capital in the form of cash for the loan will also be considered. In addition, the lender will look at your capability in loan repayment. Lenders will most likely request you to provide a business plan. Your business plan must include an estimate of your income and expenses and a list of equipment needed. Copies of your individual tax return and financial statement will also need to be included.

Franchise loans are available through a number of sources:

Franchise loans or business loans are available through banks. Banks however prefer to grant loans for franchises of reputable companies due to its guaranteed earnings. The drawback with banks is that once it is established that the loan is for franchising purposes, collateral must be provided in order for the loan to be granted. Collateral can be in the form of bonds, insurance policies, bonds or property.

You can directly approach your franchisor that can also provide you in house financing, or can recommend other lenders accredited by the company.

The cost of obtaining equipment for your franchise will cover anywhere from a quarter to three quarters of the cost of your franchise. Some franchisors offer equipment leasing schemes. This can help you lower the amount of initial start up capital you require for franchise loans.

The government can also help by guaranteeing franchise loan applications; however, the bank must decline your application for franchise loans before assistance is given.

Assistance can also be given by community development organizations for people who have a bad credit history. These organizations extend assistance in order to create jobs in certain parts of the country.

Lastly, if no lender can be of assistance you can also find financial partners or investors to fund your business.

When selecting a lender for your franchise loan, you should approach a company that specializes in franchise loans to get a better chance of approval.


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