If there wasa textbook on “how to buy a franchise,” there would be a pretty lengthy chapter on lender relations. To some misfortunate or ill-prepared entrepreneurs, lenders are seen as the cruel gatekeepers of the small business world, spending their days making judgments and crushing dreams. But it doesn’t have to be this way!
Lenders have developed keen instincts about borrowers, but that’s not a problem if you’re prepared. In this post, the FranNet teams shares six tips to help you deal with lenders to finance your franchise dreams!
- Prepare a thorough business plan. Don’t be discouraged or surprised when lenders start to scrutinize your business plan. You will need to have all of your documentation prepared. Don’t wait for the lender to prompt you for this information: take the initiative and present them a cogent, concise, and well-researched business plan. This plan should include specific dollar amounts and quantifiable statements. Because lenders are primarily concerned with how their loan will be repaid, your business plan should include a thorough repayment plan detailing what percentage of your earnings will be set aside for loan and interest payments. If you have questions about what you need to include in this plan or how to buy a franchise, a FranNet consultant can help.
- Be diligent with lender forms. Nobody likes to grind through paperwork, but you need to give the lender’s application form your full focus. Be sure to include all required information in legible handwriting and complete detail. Making mistakes at this stage may seem innocuous, but any information you omit here will delay your loan, pushing your dreams of franchise ownership a little further out of reach. Please direct any questions about your application’s completeness to a FranNet representative.
- Be precise about the amount your business requires. Lenders don’t deal in vague numbers and good intentions; they want to know how and where you’re going to spend their money, and they want these statements to be quantifiable. Don’t give your lender a lump sum: give them a breakdown detailing exactly where that money will be going. Divide the total requested amount into different categories: training expenses, marketing, research and development, salaries, and so on. Beyond putting your lenders at ease, categorizing your expenses in this way will also help you stay organized.
- Be positive, not naïve. Don’t be afraid to discuss best and worst-case scenarios with your lender. Optimism is healthy and positive outlooks are crucial for success, but you must be realistic. If you’re so optimistic that your lender gets the feeling you’re out of touch with the risks, you’ll lose credibility. Use the time with your lender to demonstrate your knowledge, not your confidence.
- Contribute to the cause. Investing some of your own money is an excellent way to show the lender that you’re serious. The lender will be reassured by the fact that you put something at stake. Your sacrifice will give your plan credibility. Aim to contribute 25-30% of the total investment for your business.
- Talk with a FranNet representative. Borrowing is a skill like any other, which means it must be learned through experience, trial and error, or coaching. You can learn all you need to secure a loan through trial and error, but that takes time and a lot of ego-endurance. Consulting with an industry professional is a much better way to improve your borrowing skills. Visit FranNet for borrowing advice, plus more tips on how to buy a franchise: http://frannet.ca/.
About FranNet Canada
FranNet is a 29-year-old company with roots in the U.S. Its purpose being to nurture every entrepreneur’s dream of business ownership. We actively employ a specific profiling and consultation method. This method is geared to each investor with a specific business model and based on franchise trends typically found in Toronto, Ontario, Vancouver, British Columbia, or Calgary, Alberta. The most lucrative Canadian franchise opportunities are waiting for you. For more details visit – http://frannet.ca/buy-a-franchise/canada-franchise-buying-process/