The Franchise Forum

Expert financial advice, content, and strategies for your franchise business

What is underwriting in a franchise loan application?

While applying for a loan can be a nerve-wracking experience for franchise owners, the period of time that comes afterward can be just as tense. This is underwriting, the process in which a lender puts all of your financial information under the microscope to assess the risk of taking you on as a borrower and your overall capacity to pay on a monthly basis.

"How long it takes an underwriter to go through all this information varies from case to case."

Here are some of the specific areas an underwriter will look at when determining whether or not to approve your loan application:

  • Your personal financial status, including IRS tax forms
  • Your company’s financial status, balance sheet and income statements.
  • Bank or credit information for yourself, your company, and any business partners
  • Any existing debts owed by you or your company, or any business partners
  • Resumes of key owners and executives of the business
  • Specific contracts you have with employees, vendors, leases etc.

How long it takes an underwriter to go through all this information varies from case to case. The most common reasons an underwriting period gets extended include inaccurate statements in your loan application (in which case you’d most likely be denied), particularly complex tax or statement information, or simply a backlog of applications.

How you can prepare for the underwriting process

You can make things easier on your underwriter by having all of this information prepared ahead of time and neatly organized, so there are fewer difficulties in getting through all of it. The longer it takes for you to compile these documents after you have applied for the loan, the longer it will take for you to hear whether or not you have been approved.

If you are at all worried about what any of this information would look like in your application, you might consider improving it before you submit the application. You will want to have a good credit score, a stable and healthy financial situation moving forward.

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