Franchise Finance

The prospect of becoming a franchise is a dream come reality for entrepreneurs. It gives them the flexibility of small business and the infrastructure of a large enterprise. Some of them are determined; they do their homework and are ready to move. Unfortunately, most of them draw back when it comes to funding the venture. No average businessman will ever have that money. The expenses involved in launching a new franchise include the following:

Franchises that are there in service too will need lots of money to launch new products or services. Fortunately, franchise finance sources are there in plenty. All you need is the following guide to determine your options and act accordingly.

Availing a franchise business loan in India

Companies that offer franchise business loans abound in number. However, you have to make sure that you are prepared enough for a lengthy process. And the first step toward this is to calculate your net worth, evaluate it by calculating your assets and liabilities, take a balance sheet and list all your assets, real estate, saving-checking accounts, direct cash available, automobiles, insurance protection, bonds-securities and other assets. Calculate their values and total them. Next comes the liabilities. Calculate the bills to be paid, auto loans, property mortgage, loans from financial institutions and other dues. Total these. Done this, subtract your liabilities from your asset.

Set this aside and evaluate your credit rating. Three important factors come into play here; your financial backup, stability, and your track record.  Franchise companies in India and all over the world will be keen to know the following facts about you:

  • The time period you have stayed in a particular location.
  • How long you were in a certain position in your job.
  • Your stability: if you are motivated enough to finish what you start.

If your record is not stable enough, brace yourself for a challenging time ahead. Your choice franchise business financing lender will want to know if you are capable of managing your personal finances. There are people who earn $200000 a year and they will always remain debtors. Some others earn just $25000 a year and will never have even a single debt. If you fall in the second category, you present yourself as someone incapable of managing a business.

The next factor that comes to play in your chance for a loan for a franchise in India is your credit report. Are you someone who pays off your debts at the earliest? Your choice franchise finance India lender will contact all major credit agencies to know your credit score. Make sure that you are prepared well for the process. Credit agencies are legally required to give you every single detail with regard to your credit score. Correct wrong information and pay off all your other debts.

Upon completing the analysis mentioned above, proceed with the tips given below:

1. Take care of the flow of cash

Know that the price of a franchise does not include the capital you need to get it operational. As a result, the entrepreneur experiences a financial emergency.  Make sure that your choice franchise business financing company lets you borrow the working capital you need. You should also be able to postpone the payment of the principle amount until your business gets on track.

2. Prepare a franchise business plan

This is the first thing institutions offering small business loans for franchises require when evaluating a loan application and preparing the same is just a breeze. Visit your franchiser’s website and download the form from there. Make sure that it describes the following:

  • Personal details: your contact information, marital status and other details you consider relevant
  • Explain your work experience and skills. Tell your lender how you plan to make your venture a success.
  • Present an outline of your business: your market, the customer base and an analysis of your competition
  • Information on your business: The premises, equipment and other details
  • Introduce your management team: Explain important roles and who are filling them
  • The marketing strategy you want to deploy: The ways you plan to draw, customers and maintain them and all about your ad campaigns
  • How much you need as loan
  • Working capital: Your invest in the venture
  • Your personal financial status: Details of your bank account, your assets and the flow of cash.

3. Discuss with your franchiser

If you need franchise business financing, your first point of contact should be your own franchiser. Almost all reputed franchisers offer financing programs designed exclusively for their franchisees. Some may do it from their own funding. Others may collaborate with other lenders for the purpose. Whatever is the choice, your franchiser is the best source of funding you can have.

Adopting this option offers you numerous benefits. The most important among them is customized lending. Your franchiser may not only finance your franchise purchase, but also the equipment you need.  Besides, they know the ins and outs of the business. And they are fully aware of the risk you take.

The franchise business financing agreement may differ depending on the type of franchise you choose. Certain companies may bear up to 75% burden if yours is a new venture. Others may frame the repayment structure on a sliding scale. Some even defer payments until you are able to go up and running. Contact your business attorney and take an informed decision in this regard.

4. Small business loans for a franchise from commercial banks

Credit unions and commercial banks too offer franchise business financing. However, the process of documentation may test your patience. Your choice institution will study both your personal and business credit scores. If you don’t have a stable track record, you are in for a tough time. Certain banks may even require you to submit collateral. You will have to pledge either your home or your business assets. If not, they may ask you to pay up to 25% of the upfront value.

Why choose Lendingkart!

Planning to apply for Franchise finance? Try Lendingkart because we offer:

  • Quick application and disbursal process
  • Flixible loan amount, repayment methods and loan tenure
  • Mortage free finance
  • Interest rates designed exclusively for SMEs

Franchise Finance FAQs:

1. Why lenders prefer bi-weekly payments?

Fortnightly payments fast-tracks the repayment process. You are able to repay your loan fast. This improves your credit rating.

2. How much is the pre-closure charge at LendingKart?

We do not levy any pre-closure charge. Please bear in mind. Pre-closure request can be made only after paying the first EMI in full.

3. Is it possible to get a business loan with a low credit rating?

It is possible. But the interest rates may sky-rocket. It is highly recommended that you improve your credit rating before applying for business loans.

4. How does LendingKart offer this low interest rate?

We do everything online. It lets us pass the savings on to our customers.

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