2 Ways Bad Credit Can Hurt Your Chances of Financing a Canadian Franchise
When you review franchisors, they review you to try to gauge your success in business. When a franchisor makes this decision, he considers many factors. One of these factors is your personal credit history.
Having a below average credit score does not necessarily mean that you will automatically be refused. However, this means that you may need to take a few extra steps to qualify for the Canadian franchise of your dreams. If your credit isn’t as good as it could be, here are some of the potential ways that can affect your ability to invest in a franchise.
Loan or lease difficulties
You may need a loan to fund your new franchise business. If you are not purchasing an in-home model, you may also need a lease for the physical location you will be operating from. Getting a lease or a loan can be difficult if you have less than ideal credit.
To demonstrate to the franchisor that you can get a loan – and a lease, if necessary – you need to create a solid business plan. If you still can’t get the financing you need despite having a solid plan, you’ll need to let the franchisor know. When you’ve already done the hard work, the franchisor may be willing to help you access other financing options outside of traditional financing.
Higher interest rates
In some cases, the lender may be willing to give you the loan you are looking for, but with a high interest rate. This means that you will end up paying higher monthly payments.
When evaluating a high-interest loan, take a close look at your projected monthly income and costs. Although you may have a higher than expected interest rate and loan repayment amount, this investment can still pay off in the long run once you work out the numbers.
If you are aware that your credit is not good, you can also take steps to improve it before trying to finance your franchise. Paying off debt, for example, can help boost your score and improve your track record.
Don’t let less than perfect credit deter you from trying to invest in a franchise. Create a solid business plan, talk to your potential franchisor, and get financing quotes from several lenders to see what may be possible in your situation.