Loan Approvals When Investing in a Franchise

August 1, 2022

You’ve chosen a franchise and are working with a franchisor. Every stage is new and fascinating as you work toward hanging your sign because you know what you want. You will be taught and assisted by your franchisor throughout the operation, but most of the financial concerns are determined on personal financial status. Are you prepared for a business loan approval?

In the months ahead of franchisor approval, new franchisees should prepare their financial situation accordingly. Traditional lenders (and SBA lenders) will assess your viability based on your credit score, without any operational history—no proof that you can or will be successful.

It’s also a risk for them, yet with a few key components, you will be prepared for their examination:

• A good credit score. A good credit score is an indication that you have demonstrated a history of successfully and diligently paying your debts. To be considered a viable borrower, aim for at least a 700-point credit score. Reduce your obligations, pay on time, and keep your rating high.
• Completed recent taxes. The lender is privy to what the government receives, so they will be aware of it. At a minimum, two years of record should be enough, but have it scanned and available.
• Some cash reserves. People who give money want you to have a personal stake in the success of your project. A lender will take notice of your commitment to succeed if you use collateral (such as your home) or save cash.
• A real business plan. Lenders want to see a clear plan for success, as well as a logical presentation of it. It will show your experience or management skills, among other things. Lenders may assess your future ability to repay any loan based on your realistic and expected timelines for profitability.
• Forecasts based on fact. A franchisor can provide data and statistics to decrease the lender’s risk. Other franchisees’ success rates and the overall performance of many locations should be positive (otherwise, you wouldn’t choose this company).

Even if you have all of your ducks in a row, obtaining a loan to start a franchise may be difficult. The procedure is time-consuming and must be given the same attention as your franchise search. Your loan readiness is closely linked to the early success of your new business. You’ll be loan-ready and fully prepared to open your new business with an organized package for lenders that emphasizes a solid financial basis.

UNITS® Moving & Portable Storage is offering lucrative franchise opportunities across the country. Start your evaluation today and join the UNITS® family!