How to Get a Commercial Franchise Loan

As an entrepreneur, you may have a little more luck obtaining a loan for a franchise than for a brand new business with no track record. Franchises bring with them a proven business model that, if you run it right, should lead to a successful career with the ability to repay a loan. Also, you will find more options available for getting a commercial franchise loan.

Instructions

Difficulty: Moderate

1. Find the franchise that you want to buy first. The timing of a new business as well as the apparent need for the service or product will make a difference when you approach lenders. Once you've decided on which franchise you want to buy, talk to the corporate franchisor about in-house financing. It is often easier to get good terms from the home office that has a big interest in selling you the business, and most franchises have in-house financing available.
2. Get a good business plan to show to lenders. List all the potential clients that you have set up once you have your business open, and explain your marketing and sales strategy in detail. Include a resume of your experience in the field. Usually the franchisor can assist you in drawing up your business plan for the banks.
3. Prepare to pay a large down payment, usually a good percentage of the loan. Lenders want to see that you have taken some risk as well. They feel better about partnering with a small business owner rather than assuming all the risk themselves. This mantra is true for in-house franchise financing as well.
4. Go to your personal banker who takes care of your mortgage and other personal loans. She already knows you and your ability to pay back the loan. You have a history with that banker that you can tap into now if you decide not to go with in-house franchise financing.

Tips & Warnings

• If your credit rating is less than stellar and you are rejected by a bank, you can apply for a loan through the Small Business Administration or through a community development program.