Franchise Loan Package

When thinking about purchasing a franchise it is important to consider every factor before making the plunge. Analyzing every angle of both the franchise you hope to buy and your personal finances and options can be the life preserver that brings you back into the black.

One question to ask before buying a franchise is whether it is a Product/Trade Name franchise or a Business Format Franchise. In the former, all that you will buy is the name and trademarks. Other than that you are on your own. In the latter, the franchisor offers help in the form of site selection, supplies, employee training, marketing plans, and in some cases assistance with financing.

This financing can come directly from the franchisor, or through a commercial lending institution. If the money comes from a bank, then you know that the franchise loan package that you get will be laid out directly for you in black and white. A bank does not mess around with its money, so they know exactly what they are willing to offer a borrower in a franchise loan package.

Usually the only sway you will have with a bank is in what end of their scale you belong to. The only way to ensure that you get the best terms from a bank is to have all your documents in order and have the same be true of your personal finances. Make sure that you have spotless credit, even if it means waiting before putting together your loan application.

If you are attempting to borrow money from a private financer-whether it is the franchisor or a separate investor-you may have a little more sway when it comes to the terms of your franchise loan package. Before contacting an investor, make sure that you have fully analyzed what you will need for your business, from supplies, real estate, construction, and labor to working capital that will let you stay afloat while your business gets its sea legs under it.

Also make sure that you are 100% clear what kind of interest rates, length of maturity, and monthly payments your franchise can afford to pay. When entering negotiations it is crucial to know exactly what you want in a franchise loan package. Without this knowledge you will not be able to counter effectively the investor's offers.

Remember that the SBA (Small Business Administration) offers guaranties on loan packages to franchises that can give the prospective small business owner access to funds that would ordinarily be out of reach. Commercial lending institutions often will not make the kind of loan that you are looking for without this SBA guaranty.

Set yourself up with the best possible situation by analyzing exactly what you and your franchise need before looking at the many loan packages available. With time and front-end work the money can be yours with a minimal amount of strings attached.