Did you know your credit score is an important part of starting a business? Keep reading to learn more about credit, how your credit score is calculated, as well as how it’s used when funding a new franchise.

Those of you who have been in franchising for a while probably remember the Great Recession and its aftereffects. Banks were suddenly facing unprecedented scrutiny, and risk tolerance dropped to zero as they were burdened with new regulations and fail-safes. Loans that had previously flowed to brands were suddenly being held up. Banks wanted franchisors to prove that they had “skin in the game.”

The onus to prove viability shifted from the franchisee (borrower) to the franchisor. Item 19 came into full bloom as brands vied to prove their worth.  The smarter franchisors were quick to adapt and complete the requirements for the Bank Credit Report and the Franchise Registry. Many changed their FDDs to show that they were willing to back the franchisee with royalty payments that ramped up other investments. Their financial statements became more detailed. This really wasn’t negotiable; if you wanted franchisees funded quickly for a fast ramp-up, you changed.