Start Up Loans For a Franchise

Franchises can offer a lender confidence in a start up loan because of a proven business model and experienced training. Not all franchises are created equal. Some franchises have not earned credibility yet. Credibility is earned over time and economic cycles and is measured by performance. Lenders will review your franchise agreement to ensure it is a fair contract (especially if the franchise is not on their approved franchise list).

Although the business model and training offered by a franchise is proven, the management and operations of the owners is not. For this reason entrepreneurs that wish to start up a franchise should have 2-3 years experience in the industry. This will provide enough time to demonstrate the individuals ability to understand the industry.

If you are considering a loan to start up a franchise, plan on the following;

1. 20% down payment. This will show the lenders that you have some skin in the game.

2. Make sure that your lender is familiar with the franchise you want to start and at a minimum the industry.

3. Prepare 2 year projections with the franchisor including your lease payments, royalties and debt payments.

4. Prepare a management resume that demonstrates your experience in the industry.

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