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Franchise Financing, various options are available to you!
| Guest post by: Harlan Friedman |
Article Overview: There are certain lenders that all they do are franchise financing, and we work very closely with them. But here's the rub; according to business brokers we work with as well as Franchisors, franchises are just not selling in this economy. The reason lack of financing.
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Free Download - SBA Loans - What Qualifies as a Small Business By Harlan Friedman |
Franchise Financing, various options are available to you!
The reason they may not be moving is two fold; one the financing aspect is getting more difficult. Second the borrowers do not have the money to qualify to purchase the franchises as a lot of them have been purchased with cash or money from other investments. To quote one friend of mine he has not sold a franchise in over six months because of the two above reasons.
So why would I spend apost on the financing of them. The reason is that they are still do-able under the right circumstances. Below are those circumstances.
Franchise Financing
• Loans selectively available from $250,000 to $5,000,000 throughout the U.S.
• Acquisition of existing franchise businesses are available with additional collateral requirements, unless the franchise is heavily equipment based.
• Start-up requests must be fully secured or show substantial outside income sufficient to cover debt service
• Up to $300,000 with minimum real estate collateral (must have 10 yr. remaining lease plus option)
• Up to $4,000,000 with real estate
• Start-ups must be fully secured by real estate
• Financing may be available for start-up, expansion, refinancing &/or acquisition
Also with creativity a franchise can be financed through the use of equipment finance companies and other non-traditional lenders. A growing answer to the lack of financing is utilizing ones Retirement funds and creating a new profit sharing plan to own the new franchise. The point is that when a client really has the desire to own a franchise there are various tools available to meet that clients needs that are not traditional loans.
Lets also not forget that the SBA has programs that will work for certain franchises that are approved by the SBA.
Borrower Profile
• Direct (and recent) management experience within the industry is required as follows: A minimum of 5 years GM or ownership experience required for restaurants A minimum of 3 years management or ownership required for all other industries Experience must be recent
• Guaranty required of: operating company (if real estate holding company is used), relevant affiliates, all individuals with 20% or more ownership and other individuals with less than 20% ownership considered key~ with respect to management experience or financial strength
• Borrowers/owners must have clean/acceptable personal credit histories
Please visit loanforbiz.com the website for Lightning Commercial Funding for more on franchising and other financing methods, also you can get free weekly commercial loan training with the purchase of our book GET Your Loan Closed!.
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About the Author: Harlan Friedman RSS for Harlan's articles - Visit Harlan's website Harlan A. Friedman, Author & Broker is president of Lightning Commercial Funding Inc., a California Financial broker. He has more than 25 years of experience as an investment banker and financial consultant. Lightning Commercial Funding specializes in Small Business Loans and Commercial Financing exclusively, throughout the United States from the startup of new business to large commercial transactions. Click here to visit Harlan's website   Franchise Financing various options are available to you The Various Roles Banker Broker and BDO Purchasing Real Estate using the SBA 504 Loan SBA Loans What Qualifies as a Small Business SBA Guarantee Fee Explained |
Related Forum Posts
Re: Enticing Franchises - Top 9 List
- All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers...
- [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there.
To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1]
Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published.
I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee?
- Dear Colleague
There is no easy answer to this question. Things to consider:
[list=]
The sizeof the Franchise
Clent base
Expected Turnover
Intellectual Property costs (recoup)
Number of Franchises
Number of employees
Original Set up costs
Franchise admin costs
An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc
The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000.
Hope that this gives you some idea
Take care
Ian[/list]
Re: Franchise Surveys
- Another good tool to researching a franchise is to speak with their existing franchisees.
This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application.
The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc...
This information is required by Federal Law to be disclosed to your prior to making a purchase.
So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Help for Inventors
- I think you're right Michelle. We need several options when it comes to something so important. Many people will sink their life savings into their inventions and they don't want to trust someone just because of something one person says about them. They should thoroughly check things like this out and you are just giving them more options. Kudos!
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