Whatever your business goals are it is likely that you will require financial assistance to achieve this – most commonly this will take the shape of a bank loan.
You’re ambitious and seeking a new challenge. You want to be your own boss and take control of your own career path and work environment but wish to avoid the obvious risk a new and inexperienced small business owner is likely to face.
A franchise seems like the perfect. You get to be your own boss while experiencing the security of an established system and brand, coupled with the added pluses of training, support and expert advice to lean on.
Whatever your chosen franchisor, their reputation is sacred. This means they will do everything in their power to help you achieve your goals and a big part of that will be making sure aren’t overburdened by your financial commitments.
But it must be noted, the buck stops with you to prove to your franchisor that you have the capacity to meet your financial obligations.
Unless you are lucky to have ample existing capital, you will need to get a bank loan or loan from another lender.
While there are many negative connotations associated with banks and banking, the reality is, similarly to franchisors, banks are keen to see businesses grow and succeed. Their main concern is that you will be able to make the repayments.
Here are 3 steps to help make sure you get a bank loan and ensure your entrepreneurial dreams become a reality:
Get your ducks in a row
Getting your financial information together shouldn’t be approached with dismay. It is an exercise that offers a great chance to do an in-depth appraisal of the business and will help you make your mind up how this investment opportunity will work for you.
Financial institutions are cautious by nature and processes tend to move slowly so anything you can do to speed things up is a big plus for you and your ambitions.
Take your time and be meticulous, this is your opportunity to present yourself in the best possible light to the bank.
Good preparation is key to enhancing your application’s success; if you need to amend figures or supply additional documents you will delay approval.
Banks are cautious and slow-moving so everything you can do to accelerate the process will work in your favour. This is your chance to sell yourself to the lender so present an accurate and organised picture. Take your time and don’t be rushed because errors will erode your credibility. Good prep will enhance the chances of your application’s success.
Start with a business plan
A business plan will provide the lender with a comprehensive insight into your business strategy and plan for achieving your business goals. Be honest, accurate and upfront when it comes to the financial summary of your franchised business.
Be sure to include a summary of the background and skills the key managers and support personnel possess. This will assure the bank that the business will be run successfully.
Keep it concise; focus on quality rather than quantity. Utilise the franchise disclosure document. Your franchisor may provide assistance with your business plan so it is worth asking them.
A good business plan will calculate the following:
- set up costs
- forecast profit and loss
- offer cash flow projections
- provide a forecast balance sheet.
Use these figures to calculate the amount you need to borrow and estimate your loan repayments. It is vital your cashflow is as robust and realistic as possible.
Personal documentation
Provide asset & liability statements and a summary of your personal income aside from the proposed franchise business.
Bank statements will provide proof of personal income, savings, loans and credit card debts.
If you have a guarantor for the loan, provide that information too.
Talk to an accountant
Before getting the bank loan, get expert advice and seek out the assistance of accountants who understand the franchising industry. Ask for feedback on your business plan.
Compare lenders to find the best loan to suit your needs. If you don’t have time to do this yourself, enlist the help of finance brokers.
With all your prep done, you will finally need to take stock of your own personal circumstance. If the numbers don’t add up or there is no wriggle room, it is not too late to hit pause.
Your dream can still become a reality. You can look at financial adjustments like clearing some debts, building up savings or taking a look at a more affordable franchise opportunity.
You can look at managing your personal finances by paying down debts and accruing savings, examining more affordable franchise systems or waiting for changes in the market. It won’t happen overnight, but it will happen, and when it does your patience will be rewarded.