Merchant Loans for Franchising Opportunities

Merchant loans can help you build your own business by purchasing and operating a franchise. All business loans are determined based on the unique factors in your personal credit and your business plan. A franchise can make the loan process easier, because the business plan will be predetermined, expediting the process and getting you better loan rates.

What is a Franchise?

A franchise is a branch of an established business. Not all branches are franchises, however. Only some corporations and companies allow franchising opportunities. These companies provide general guidelines for how the business must be run in order to use the company's name and other information. After these guidelines are met, it is up to the individual owner to run the business. Franchises are purchased from the company. In exchange for the funds, the corporation then provides some marketing and legal support. On the whole, though, it is up to the new business owner to make a profit.

Why are Franchise Loans Unique?

Franchise loans are unique from other small business loans. Small business loans partially rely on the possibility for a company to be profitable. This is usually determined based on the business plan. With a franchise, you will receive a business plan from the company. You will also receive some other support, making your chance for success greater. Your bank will only have to evaluate whether you are capable of running the franchise and whether there is a need in your area. Your personal financial health will be less of a factor, but it will still come into play.

What are the Dangers of Merchant Loans?

Merchant loans present many of the same risks as personal loans, especially in the startup phases. Once a business is established, it will have business credit to get a new loan. In the beginning, though, you will be evaluated on your personal credit. The responsibility for loan repayment will fall on you personally. The franchise will partially support you in securing the loan, but most of the responsibility will fall solely on you. In fact, you may not even be approved as a franchisee if you cannot secure a loan for the purchase. 

How do I Get a Merchant Loan?

Getting a merchant loan requires a specific application and a business plan. The business plan will be backed by your franchise, which will add credibility and reduce the time needed on your end to create one. Your loan application, however, will come from you. The application will evaluate your creditworthiness based on how you have performed on past loans. If you have defaulted or missed payments in the past, you will have to provide enough information to overcome these issues in order to be approved. Preparing your loan carefully and overcoming objections are the keys to securing a loan.