What should you know about loan for franchise business: franchise mortgages and loans? It is one thing wanting to own your own business, but obtaining franchise mortgages or loans to finance the purchase of a ready-made business can be for some, a daunting prospect. Fundamentally, a franchisee should have fully considered the implications of owning the franchise, not only financially, but also in their ability to conduct and bankroll the business, prior to entering into any formal agreements. A significant proportion of franchisees require franchise loans to fund the purchase of their new business venture. The extent to which external capitalisation is required depends on the type of franchise arrangement they are entering into, the strength and profitability of the franchise itself, and the applicants experience and documented business plans.
Sources of Franchise Loans
There are a number of different types of lenders that are potential sources of commercial finance who will fund the acquisition of a franchise, and so knowledge as to lender preference is essential if the applicant is not to lose valuable time and money in the long run in establishing funding during the acquisition stage of the process. Funding may also be available closer to home, so family and friends may also be considered as sources of short term finance but make sure that you do not financially expose these partners to changes in their own future financial positions. To prevent franchisees from obtaining too many credit search stamps on their credit file (which can be viewed negatively by lenders), it is imperative to identify and approach only those lenders most willing to enter into loan for franchise business agreements.
High Street lenders will typically lend up to 70% of the franchise cost for experienced franchisees buying a known and credible franchise. First time franchisees, or people purchasing young or unknown franchises, may expect Banks to be unwilling to lend more than 50%. Franchise Lending conditions can be very strict so make sure to prepare all required informations.