Entrepreneurs considering purchasing a cell phone repair franchise sometimes decide to seek a franchising loan from a third party lender. Taking this step may impact the profitability of the business during the near future. At least four important considerations typically emerge when a franchisee employs this strategy:

One: Check With a Local Bank

Financial experts urge prospective franchisees not to discount services available through local financial institutions. Today, some five thousand community banks assist small businesses across the United States. Their lending departments sometimes display a willingness to consider a loan applicant’s good character and reputation during the process of evaluating a loan application. Even if a prospective franchisee lacks extensive business expertise or assets, this factor sometimes proves important in the outcome of the decision.

Two: Carefully Evaluate The Available Down payment And Collateral

Before seeking a franchise loan from a third party lender, prospective franchisees should carefully consider the available down payment and the collateral. Remember, a loan recipient may potentially lose assets pledged as collateral for a business loan (including a franchise loan). While some lenders will only consider lending to applicants willing to make a significant financial commitment to a new business, not every franchise succeeds.

Three: Personal Credit Scores Matter to Lenders

A prospective franchisee may lack an extensive business track record. Consequently, the entrepreneur’s personal credit history often helps a lender decide whether or not to make a franchise loan. Before considering asking a bank to finance the acquisition of a new business, it may prove useful to evaluate your credit scores. In general, applicants with high credit scores tend to obtain more favorable loan terms. They may receive loans at considerably lower rates of interest, for example. Working to improve a low credit score often serves as a useful first step when considering entering into a franchise agreement.

Four: Don’t Overlook The Vital Importance of a Business Plan

Finally, remember to create a strong business plan before seeking a franchise loan. Although a franchise operation typically benefits from the franchise model itself, most third party lenders still wish to review a well-crafted, detailed business plan. This documentation may permit a lender to provide funding for a fledgling enterprise. Taking the time to prepare this roadmap for business success carefully usually greatly assists a prospective franchisee seeking financing from a financial institution.