(This is a Guest Post from Jessica Davis)
People looking to finance the purchase or running of a franchise have had to deal with rough times in the past few years. The economic climate meant that getting good deals on loans was almost impossible crushing the dreams of many prospective franchise business owners. However, times are starting to look up a bit and some of the numbers from SBA are promising. So if you’re looking to purchase a franchise, getting the best franchise loan available is important. But how? How do you even go about looking for the loans and loan options for the franchise you want to buy? Here are a few tips:
Getting The Best Franchise Loan: Options
There are many commercial banks that give out loans to purchase franchises. So if you are looking for financing options, then you can look to such banks. However, you must have a good credit rating. This is the most important factor when it comes to getting financing from banks. Sometimes it does happen that conventional lenders may reject your application. In such cases, you can look to SBA-backed loans. Some franchisors offer partial internal financing to franchisee owners.
Veterans, military personnel transitioning to civilian life and spouses of veterans can apply to get loans from a government program called Patriot Express. This lending program has fast approval times and the loans come with some of lowest rates.
Get Your Loan Documents In Order
To make sure your loan application gets approved smoothly and without too many delays, make sure your loan package is flawless. Your loan package must have copies of tax return statements for the past three financial years, all documents relating to the verification of the source of your down payment and personal finance statements.
And, don’t forget to prepare one of these.
Choose The Best Franchises
Lenders or banks prefer businesses or franchisors that have a good track record and have proven that they are quite immune to the fluctuations in economies and can withstand harsh economic times. This is why the franchisor or the company that you choose to be a franchisee of is also very important. Choose franchisors or companies that have a lot of successful branches or franchises and have had a good financial record despite the economic climate. You need to be able to prove that the venture you choose to work with has been able to do well in all types of financial times.
Gather Enough Collateral
Loans approved without any collateral are almost unheard of and are frankly, quite dubious. Even if you have a good credit history and score, you need to secure a franchise loan with at least a mortgage on your residential property of any other kind of property. Apart from the mortgage, you must be willing to put down some money against the loan. Banks prefer that you put up at least 20% of the amount of the loan to approve your loan. It does help if you have a previous relationship with the bank and have a trustworthy relationship with them. If you are looking to get a franchise loan from a new bank that you have not worked with before, be prepared to work a little harder to gain their trust.
As you can see, getting the best franchise loan may not be easy…or simple, but it’s going to be worth it. Go after your dreams!
( Jessica Davis is a Content Strategy Specialist with Godot Media – a leading Content Marketing company. She has years of experience in working closely with online businesses, helping them refine their marketing strategy through optimum use of content. Her other interests are online content strategy, sports and even fashion. )