Imagine telling a real estate agent that you’re ready to start viewing properties, but you aren’t pre-qualified for a mortgage. What would the agent say to you?
Here’s the point: We won’t view you as a legitimate franchisee candidate unless you’re getting your funding in order at the same time you’ve started your franchise acquisition. Expect us to ask you on every call, What’s the status of your funding?
So, congratulations on the steps you’ve taken so far in your franchise investigation. Many people want to own their own business, but for one reason or another don’t even make it this far in the process. The fact that you’re ready to start exploring financing options says a great deal about your desire to become a franchise business owner. As you embark on your journey, one of the most important steps is to secure financing.
Therefore, by the time you are ready to make your final decision on a franchise, you MUST have your funding in place. The current environment in the lending markets makes selecting the right resource for your funding very important. Some of the following apply only to our US-based prospects.
- Banks are lending on Home Equity again – This is called a Home Equity Line Of Credit or H.E.L.O.C. Obtain your loan before you quit your job. Bankers want to see that there is a current source of income to repay the loan.
- Many franchisees are utilizing their retirement to fund the business through a government-overseen program called Rollover for Business Start-Ups or R.O.B.S. No penalty, no interest rate, no immediate repayment to your retirement account. SBA loans are attainable but there are eligibility factors that must be met.
- If you have a stock portfolio, it is possible to use that as the collateral for a business loan, while preserving your investment
- The Small Business Administration or SBA will guarantee certain loans with several restrictions. Interest rates are great, the personal obligation is high.
- For those needing bridge funding, unsecured loans may be an option too. The interest rates are reflective of the risk.
Two main factors affect the ability to borrow today:
- The quality of the franchisor. Lenders may require less down and lower collateral for well-established franchisors.
- The quality of the franchisee candidate
For any franchisee candidate, lenders consider borrowers if they have:
- 25-30% cash payment into the total project cost of the business
- Cash reserves after the down payment
- An outside source of income (working spouse)
- 50% collateral-to-loan amount ratio
- Business ownership experience, industry experience or strong management skills
- A credit score above 700
Depending on the source, funding can take a few weeks to a few months. This part of your process should be as complete as possible as you decide on a business. If not, it could delay your progress by several months.
Becoming a franchisee is a major life decision, very much akin to buying a home. Before you selected the appropriate home you reviewed your budget and then went to your bank or lender. Did they provide you with pre-qualification? This way, when you found the perfect home, condo or townhouse you could make an offer. Read more here about the Guidant Skedaddle Wildlife Franchise Sheet 2017 or FranFund’s specialized programs for Skedaddle franchises.
Connect with a FranFund consultant to review your funding options.
Find out now if you are prequalified for a franchise investment.
Both FranFund and Guidant are dedicated to supporting the franchise industry and are the industry’s premier providers of funding. They both offer the most integrated and streamlined financing solutions with money-back guarantees.