Franchising agreements can be very beneficial for both the franchisor and the franchisee. The franchisor gets to expand its business and brand into different areas without the expense of opening a chain location, and the franchisee gets to use the trademark and good will established by an existing and well-known company. If you have done the research on becoming a franchisee and have decided to take the plunge, your next big concern is probably how to secure your franchise financing.
First, it is a good idea to understand your current net worth. Take out a piece of paper or use a spreadsheet to list your assets and your debts. Be sure to make this an exhaustive list, including checking and savings accounts, money you have on hand, the current market value of any real estate you own, cars, securities, bonds, insurance values, and any other assets you may have. Total them up to see what value you currently have. Next, do the same thing with your liabilities. Include any bills and debts you have, such as mortgages, lines of credit, car loans, credit card debt, loans from finance companies, etc. Finally, take your total value and deduct your total liabilities. This will give you an idea of how much you will need to borrow for your franchise financing.
Once you are clear about your net worth, check into your credit history. In recent years, the federal government passed the Fair Credit Reporting Act (or FCRA) that requires each national credit reporting company to provide people with a free credit report once every year. This means that it is quick and easy to obtain your credit information online, for free. Once you have a copy of your credit report, take a look at anything that lending institutions may regard poorly.
Generally, lenders are checking to see if you have the stability, track record, and income that indicate a good loan candidate. For example, have you been employed by the same company for several years? If yes, lenders might look more favorably on your application because they assume this means you are pretty reliable. Be on the lookout for anything in your credit report that will be red flags to lending institutions, so that you can provide good explanations when you apply for your franchise financing.
Another reason to study your credit report is to see if there are any delinquencies. Sometimes people who think they have no smudges in their credit history are surprised at what they find when they look for their credit scores. Small things you may have forgotten—like co-signing for a sibling’s phone years ago—may result in a ding on your record. It is a good idea to look these over before seeing a lender, because you may be able to resolve some of them, and explain what happened to the loan officer.
The right preparation is a great first step toward securing franchise financing. Once you know how you stand financially, you will understand better how to make yourself a good candidate to lenders.
See more on how Gold Beacon Capital Corp can help your Franchise obtain the financing it needs!