Loans can be outstanding tools to help franchisees grow and thrive. However, many franchisees attempt to apply for loans before they are ready to do so, which could lead to some major financial challenges down the road

Here are a few tips that will help you determine whether or not you are truly ready for a loan:

Your experience is important

Perhaps just as important as the financial state of your business (and yourself as an individual) is your experience in your field and with your franchise brand. Lenders will look for a history of managerial experience so they can better determine if the business is in good hands. They see this type of experience as making you less of a risk for the loan. So before you apply for a loan, consider whether lenders will think of you as having had enough experience. If not, consider what you can do to help pad your resume ahead of time.

Your personal credit can affect your application success

Sure, the loan application is for your business and not yourself. However, lenders will still check your personal credit score so they can get an idea of how responsible you will be with the money. You can get a copy of your credit score through a variety of reporting agencies, and are even entitled to a free copy once every 12 months. If your credit score isn’t exactly up to snuff, then you should wait until you have built up good credit before applying for a business loan.

You should be able to produce extensive financial documentation

There is a good amount of paperwork involved with taking out a loan for your franchise. You should have detailed balance sheets, tax returns and profit and loss statements. Therefore, it is important that you stay extremely organized with all of this information. You could try using automation or workflow software like QuickBooks to help you stay organized.