Franchise Loans

Franchise Loans

Details About Franchise Loans

You’ve researched the brand, done your due diligence, and now you want to take the next step toward being the owner of a franchise. Choosing a franchise to purchase is difficult enough, but finding a franchise loan to fund the venture can prove even more difficult. Before you apply for a franchise loan you should determine your net worth and formulate a business plan. A good business plan should always include detailed research of the business and industry, accurate pro formas, a 12-month marketing plan, estimates of working capital, projections, and cost analyses.

What do lenders look for?

When lenders review your franchise loan application, they will look at your business plan, review your liquid assets, valuable collateral, liabilities, assets, credit score (generally 640 or above), the Loan To Value (LTV), and Debt Service Coverage Ratio (DSCR).

Best practice tips:

  • It’s best not to invest more than 75% of your cash reserves
  • Make rational requests and do plenty of research on the industry
  • Additional costs can include down payments, building, equipment, fixtures, signs, inventory, leasehold improvements, training, and marketing collateral

Extra tools for you: