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Why Loan Financing for a Franchise Still Requires Careful Planning

Woman in apron looking at laptopMany aspiring entrepreneurs turn to a franchise business for a variety of reasons, including an easier time to apply for financing from lenders compared to a startup owner’s application.

Whether you are interested in retail or sign franchise opportunities, the process of applying for a business loan still requires careful planning on your part.

Money Matters

Finding a lender should be your priority. You can save time and effort by knowing which banks or lenders are more willing to grant a loan based on your industry.

For instance, some financial institutions may prioritize retail franchisees more than those in the food service industry. Just like your franchise business, many lenders also target a certain market for their company loan products.

If you still struggle with a loan application, you should contact your franchisor to ask for assistance. A financial consultant serves as another option if your budget allows it, especially if you are looking to borrow more than $350,000.

Alternative Businesses

The popularity of franchise startups is becoming more common, due to more people wanting an alternative business structure. It can be difficult to choose since there are around 300 new franchise startups that appear every year.

A common mistake behind many start-up franchisees involves looking at the current trends for growth, instead of the brand’s sustainability over the long term. You should also look into the franchisor’s ability to steer the company towards growth.

Aside from leadership, they should also be transparent on their available financial resources, since lack of funding capital remains one of the key reasons for a franchise start-up’s failure.

Banks and financial lenders are generally more lenient on lending money to a franchise business, due to the latter’s established record of cash flow, among other factors. However, there is no guarantee of approval. You need to be aware of certain strategies to increase your chances of securing a loan.

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