Diving into your first (or next) franchise experience can be a fun and exciting time! But there are a lot of things to cover before you go and set up shop. And what is the most important is getting your loan.
The rate you pay on your loan, how much you take out, and dozens of other factors can greatly affect the success for your franchises and what you are able to get out of it. So what is the best way to start?
Check Your Credit Score
When getting a loan, it’s always best to start from the beginning. This score is determined by several factors. This includes credit history, current debt, number of credit inquiries, etc. The higher a credit score is the more likely you are to be approved for your loan!
Apply for the Loan
Okay, so you have a good credit score. Now, it’s time to apply for the loan. Specifically, what you will need to start a franchise is a small business loan. Most often, this is done through this is done through a Small Business Administration’s 7(a) loan program.
This type of loan won’t lend all the money to your franchise or business. Instead, the Small Business Administration guarantees only part of the loaned amount. How much will that be, you might ask? Well, it varies anywhere from 5,000 - 5 million dollars. But where the real value is in the interest rate. These loans have a prime rate of 2.75 percent. That’s less than the rate of inflation!
Take Out a Home Equity Loan
If you can avoid this step, it is best. But sometimes, a business will need a little extra “emph” to get it off the ground. A home equity loan is a loan where your house is used as collateral. That means if you don’t pay, you could end up losing your home. However, this loan is often low cost, has a quick turnaround, and has a low interest rate.