If 2017 is the year you plan to become a franchise owner, don’t wait until the new year to start your preparation. In addition to these administrative tasks that will set you up for success in your new franchise, there are measures you can take to ensure that either you are an appealing candidate for franchise financing or you have the funds to cover your starting expenses and beyond.
#1. Check Your Credit Score
If you’ve had no reason to look at your credit report lately, now is a good time to do that so that you can take care of any discrepancies that might stand in the way of you getting a loan.
First, look at your credit score. The majority of lenders will want you to have a credit score of 600 or better, at least for favorable terms, so if yours isn’t there or you have a bankruptcy in the past 7 years, you need to use this time to build up your credit rating. We’ll cover strategies in the next tip.
#2. Beef Up Your Credit Rating
If you have less-than-stellar credit, start by reducing your debt-to-credit ratio so that you have more credit than debt.You’ll probably need to pay more than the minimum owed on your credit cards each month to accomplish this.
If you don’t have a long credit history or haven’t ever had many credit cards or loans, you should start building it now by applying for a few credit cards so that you have a track record of using credit and then paying it off on time. This will help your credit score as well.
#3. Look for Discrepancies
Next, make sure your credit report is accurate. Are there any accounts showing up as open that are closed, or vice versa? Are all of your accounts in good standing? Sometimes a creditor hasn’t updated the credit score reporting service (like Experian) with your activity, and there may be inaccurate information on your report, so go over it with a fine-tooth comb.
#4. Make a Budget
Even if you’re months away from buying your franchise, it’s wise to get an idea of what the purchase and initial setup will cost you.
There are several reasons to create a franchise budget this far out. For one, it can help you decide whether you have enough money in savings to fund the endeavor or if you need to take out a bank loan. Also, you may realize that you can’t afford to quit your day job, which may change your franchise timeline or the amount of time you can commit to the day-to-day operations. And you can decide whether buying a particular franchise with a certain expected revenue will net you the kinds of profit you need for your lifestyle.
#5. Start Saving
Even if you plan to take out a business loan, you will need funds to cover your personal expenses while you get up and running. If you’re planning to quit your job, consider how you’ll pay your house mortgage and bills. Setting aside a little extra each month can take the stress off of your finances once you become a franchisee, when things are a little uncertain up front and profit isn’t a given.
These financial practices will put you in an excellent position to launch your franchise in 2017.