Next level franchise finance

Franchisees typically have access to various loan types:

• SBA Loans (Small Business Administration): Government-backed loans generally offer lower interest rates and longer repayment terms.
• Conventional Business Loans: Traditional loans offered by banks or credit unions often require strong credit and collateral.
• Equipment Financing: Loans specifically designed to purchase equipment.
• Working Capital Loans: Short-term loans for day-to-day operating expenses.
• Franchise-Specific Loans: Specialized loans to franchise businesses.

Loan Mantra can connect franchisees with an appropriate franchise lender and loan product.

A minimum credit score required for a franchise loan typically falls between 600 and 680.
However, this requirement varies on the lender, franchise brand, and loan type.

Here is an approximate breakdown of credit score requirements by loan type:

• SBA Loans: A minimum score of around 640 to 680 is often needed. SBA loans offer favorable terms but have stricter credit requirements.
• Traditional Bank Loans: Banks usually require a credit score of 700 or above for franchise financing. These loans generally require a strong financial history and collateral.
• Alternative Lenders: Alternative lenders may offer more flexibility, sometimes approving loans with credit scores as low as 600. However, they may also have higher interest rates and shorter repayment terms.
• Franchise-Specific Lenders: Some franchise brands work with lenders who specialize in their business model, which may reduce credit score requirements. In these cases, scores around 600-650 may be accepted if the borrower meets other criteria.

Besides credit score, lenders consider other factors like cash flow, business experience, and net worth. Franchise brands with established support and a high success rate may also improve a lender’s appetite to finance. Franchisors and franchisees can work together on Loan Mantra to qualify for funding and find a lender (or work with their existing lender in an expedited, transparent, and frictionless way).

Generally, you can borrow up to 80% of the total project cost, with a 15-20% down payment.

To apply for a loan, you generally need the following:

• Personal Identification: Driver’s license or passport to verify identity.
• Personal Credit Report: Shows your credit history and score.
• Business Plan: Explains how your franchise will operate and how you plan to succeed.
• Franchise Agreement or Transaction Details: The contract between you and the franchisor.
• Financial Statements:
  • Personal financial statements (assets, liabilities, net worth).
  • Business financial statements (if you’re already in business).
• Tax Returns:
  • Personal tax returns (usually the prior 3 years).
  • Business tax returns (if you own an existing business).
• Bank Statements: Personal and business bank statements from the prior 3-6 months.
• Collateral Information: Details on assets (property, equipment) you can use to secure the loan.
• Franchise Disclosure Document (FDD): Provides key details about the franchise system.
• Legal Documents: Any licenses, leases, or contracts related to the business.

Having these documents will help streamline the loan application and increase your chances of approval. Applicants can also safely store and manage financial documents on Loan Mantra to apply for a franchise loan or additional capital down the road.

The loan timeline varies depending on the type of loan and the lender, but a typical timeframe from application to closing is 60-90 days. However, Loan Mantra generally delivers a completed loan in 45-60 days.

Yes, you can use your loan to cover startup costs and, most likely, your franchise fees.

The repayment terms for a loan depend on the type of loan, lender, and financial situation.

Here’s a breakdown of general repayment terms:

• SBA
  • Term Length: 10-25 years
  • Interest Rates: 6-9% (variable or fixed)
  • Use: Best for long-term business investments, real estate, and large equipment purchases
  • Payment Schedule: Monthly payments

• Conventional
  • Term Length: 3-10 years
  • Interest Rates: 5-8% (depending on credit and loan amount)
  • Use: General business needs, such as expansion or working capital
  • Payment Schedule: Monthly payments

• Franchise-Specific
  • Term Length: 5-10 years
  • Interest Rates: Typically between 6-10%
  • Use: Specifically for franchise purchases, equipment, or build-out costs
  • Payment Schedule: Monthly payments

• Equipment Financing
  • Term Length: 5-7 years (based on the life of the equipment).
  • Interest Rates: 6-12%.
  • Use: Financing for equipment purchases.
  • Payment Schedule: Monthly payments, sometimes aligned with equipment usage.

• Working Capital
  • Term Length: 1-5 years
  • Interest Rates: 7-30% (depending on the lender and risk).
  • Use: Short-term expenses like payroll or inventory
  • Payment Schedule: Monthly or bi-weekly payments

The loan type and your financial profile will determine the length, rate, and payment structure of your loan.

Lenders typically evaluate several key factors, including:

• Credit history: Personal and business credit scores are critical
• Personal financials: This includes personal financial statements, net worth, and liquidity
• Franchise performance: Lenders review the overall success and stability of the franchise brand
• Experience: What proven experience does the franchisee have in owning a business
• Business plan: Lenders want to see a solid plan that demonstrates the franchisee’s ability to run a successful business
• Collateral: Lenders may require collateral, such as property or equipment

Yes, franchisors can assist franchisees in several ways, including:

• A Preferred Lender List: Franchisors often have relationships with lenders who are familiar with the franchise system and are more likely to approve loans
• Providing Financial Performance Representations (FPR): These may help franchisees present a stronger case to lenders
• Internal Financing Programs: Some franchisors offer direct financing to provide financing options
• Loan Mantra: Franchisors who work with Loan Mantra gain access to a deep knowledge and platform of lenders and lending knowledge to help franchisees get financing