If you’re looking to obtain funding to purchase a commercial franchise, start with your local bank or credit union if you belong to one. These financial institutions are accustomed to making such loans. However, you should check your credit rating first and clear up any problems before you approach a business lender for a loan.
Documents to Present When Applying for a Business Franchise Loan
In addition to reviewing your credit report and credit score, your lender will ask for the following documentation:
- A personal financial statement guaranteeing repayment of the loan.
- Verification of the source of your down payment.
- Personal and/or business tax returns for the past three years.
The type of franchise that you intend to purchase matters. Bankers will look at whether the business name has an established history in the area and how many locations it has locally and across the country. The latter is important because lenders like to see that the franchise can do well in any area of the country or financial climate.
Be Prepared to Put 20 Percent Down and Pledge Collateral
Even if you have an excellent credit rating, it’s rare for lenders to approve this large of a loan without personal collateral. You should go into the transaction knowing that you may need to provide a copy of the mortgage to your home or another large asset. Most banks and credit unions will ask for a 20 percent down payment as well.
Options other Than Bank or Credit Union Loans
It can be difficult to obtain approval for a franchise loan when you don’t have a long, solid credit history or an established relationship with the lender. You might also consider applying for financing with the Small Business Administration or checking out the financing options available through Steadfast Funding Partners. We welcome your inquiry today.