Obtaining Financing

Most franchise business acquisitions involve the use of borrowed funds. Many banks, however, despite their hype, are not good places to obtain the start up financing you will need. Too often, the banker response to your request is along these lines: "sure we can lend you $100,000; just deposit $100,000 in one of our accounts and we will be glad to make a loan to you for $100,000." That's not much help to someone seeking to buy a business, is it? Some businesses require the purchase of equipment separate from your construction build out. It is often best to finance the acquisition of your equipment via a reputable equipment leasing company.

It is important that you identify and work with the right banks, lenders and equipment leasing companies. By that we mean the ones which truly understand and are eager to work with first time business owners. Our Resource List of preferred business partners can save you many hours of searching and frustration. (link on the "Our Resource List" phrase to the Resource List page).

Proper preparation and a thorough, professional presentation of you and your business, will greatly influence the financing institution's decision as to whether or not to extend you the amount of credit you desire and the terms of the financing.

Recognize that lenders much prefer to see an application for a franchise business loan rather than a build it from scratch opportunity. Why? Because banks understand and appreciate the value of having the franchisor's experience, established systems and business model, training and support, behind you. With the strength of the franchisor's system behind you, you are a much better, safer risk for the lender than if you were proposing to develop your own business model.

You know that your chosen franchise business is a great opportunity (if you didn't, you wouldn't be buying it!). Remember that you need to share your excitement and vision with your lender. They may not know anything about the opportunity except what you tell them. You must educate the lender about you and the potential of your business opportunity. Show them why you would be a great, long term customer!

You Need A Business Plan

You can't get financing without a business plan, period. Your business plan should clearly and convincingly communicate what you intend to accomplish and how you plan to achieve your goals.

During the process of selecting your franchise business you will, preferably with the assistance of a Franchise Business Coach, (link "Franchise Business Coach" to the Coaching Program page) prepare profit projections and revenue models and will have considered the structure of the team you will need to have in place to successfully operate your new business. All of this information, planning and projection will be incorporated into your business plan. The process of writing the business plan forces you to focus on what you need to succeed. Our Resource List partners can assist you. (link on "Our Resource List" to the Resource List page).

Present Professionally

In nearly any setting, first impressions are critical. The same holds true for your financing relationships. Present yourself professionally. Show your confidence and attention to detail (lenders LOVE attention to detail).

Your response to the lender's application and the additional detail and documentation you provide constitutes your first impression. Be neat. Answer all the questions and provide detailed, complete answers. You're seeking a partner. If you don't care enough to be thorough, why would the lender be interested in partnering with you? Show the lender why they should be comfortable and confident to lend you money. Show them why you and your franchise business will succeed and why you will be a great long term, repeat customer - you do intend to own and operate numerous locations or businesses, don't you? … if not we want you to start thinking bigger!!!

Know What You Need and Explain Your Plan

Lay out in detail for the lender how much money you need and what you intend to do with the money. Be realistic. From your initial discussion with the lender, which will take place before they send you an application, you should have a good overview of the available programs. Fit your request within their programs. If they traditionally lend 70% of the total cost of the investment, don't ask for a 90% loan.

Be realistic also in your projections and expectations for your business. Don't overreach. Don't fluff. You want to instill confidence and credibility, not create skepticism. Lenders need to see and understand your plan for operating the business profitably. Show them why you are confident that your franchise business will generate the funds needed to repay the loan while providing you with a reasonable return on your investment.

Discuss What Can Go Wrong

Don't stick your head in the sand. Lenders will appreciate your candor and you will build credibility if you discuss in your presentation what might not go as planned. Identify potential weaknesses, risks, competitive factors and problems with the business. But then be sure to follow that up with a discussion of your plans for avoiding or addressing these matters.

Put Yourself In The Lender’s Shoes

As you need to when you search for the right franchise opportunity, you need to consider here how you look to the people on the other side of the table. If you were the lender, would you give yourself the loan requested for this franchise business?

If not, adjust the picture. Address your weaknesses. If you have poor credit, find a money partner with good credit and partner with them in the new business. Strengthen your business plan. Add the team members you need to succeed. Tighten your financial projections. Objectively review yourself and your presentation and make it as strong as possible before you submit it to a lender. Remember, you only get one chance to make an impressive, first impression

Be Persistent

Depending on your financial situation, the opportunity, the lender, general market conditions or any number of other factors, it may not be easy to obtain the financing you need for the acquisition of your franchise business.

Do not give up after an initial rejection. Talk to the lender. Ask if there are things you could change about your team or the loan structure that would allow them to make the loan. Even if you can not fix things with this lender you want to learn the weaknesses the lender perceived in your plan.

Change the picture you present. Fix your weaknesses and try again with another lender. Be sure you do all you can to make a great first impression in their office.

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With no risk and no obligation you can add Franchise Success Center to your Success Team today!

The process of identifying and acquiring the right franchise business opportunity can be daunting and you can make very costly mistakes if you try to do it on your own. We designed our educational, coaching and broker/referral program to help you avoid making those costly mistakes. Our goal is to make you a more informed, smarter buyer and to help you become a successful franchise business owner.

Register now for your Free Consultation with one of our franchise broker representatives and you will be on your way to owning your own franchised business.

We look forward to your success!

Franchise Success Center provides educational and broker services but is not qualified to advise in any part of the purchase of a franchise or business opportunity. This report in no way offers business advice. Investing in a franchise is a complicated and serious matter. You are urged to seek professional advice and to consult with a franchise attorney, an accountant, and/or other professionals before you make your decision.