Food Franchise Business · Money & Financing

What do Lenders Look For?

Food Franchise Finance

Worried about qualifying for that financing that you need to open your own restaurant? This article tells you exactly what lenders are looking for when they make their decision about whether or not you qualify for the loan.

To put things into simple perspective lenders are looking for some basic things:

• Your character. The lender needs to know that you are reliable and that you have a past history of paying your bills and other loan payments on time. The bottom line is that they want to know that they are going to get back the money that they loaned you. All lenders will ask you for references and the names of your other creditors.
• Your capacity. All lenders want to know that you can pay back the money that they lend you. This means that you need to have enough of an income to make your payments. Lenders will take a look at all of your business and personal expenses.
• Your collateral. Lenders want you to have collateral so that if you don't pay back the money that you borrowed they have something that they can take in return that is worth money. This is called a secure loan. If you don't have collateral, and don't require collateral, it is called an unsecured loan.

According to Marilyn Lewis, a financing consultant for MSN House and Home, the perfect loan applicant meets the following criteria:

• Good standing credit. Creditors like to see that you've had credit for at least two years and that you've made your payments on time. They also like to see credit to spare on your credit cards, which shows that you are capable of spending within your means only when you need to and not just because you have the credit to do so.
• History of employment. Creditors like to see that you've worked for at least two years for one employer.
• Late payments. If you've had any late payments towards your mortgage, or other loans, creditors will score you negatively for this. Creditors like to see payments that are made on time.
• Liabilities. The total amount of your liabilities shouldn't amount to more than 42 percent of your income. Liabilities can include credit card payments, mortgage payments, child support payments, alimony payments, car payments, or student loan payments.
• Assets. Creditors like to see that you have at least two month of payment assets so you are able to make these two payments in the event that you aren't working or aren't seeing profit from your business.

After you apply for your loan you'll be required to wait until the lender looks over all your supporting documents and data. Ron Culver, account executive for Webster Bank, a Connecticut-based wholesale mortgage company says:

"The first and most common answer is your credit score. They also look at employment history, debt history, liabilities, your job, how much you make. There are other small things: bankruptcy history, collection history. A 'lack of credit' is an unknown. This person doesn't use credit, and we don't know if they are going to be responsible if they do."

Good luck finding the perfect food franchise opportunity!

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