Benetrends, a member of the IFA’s prestigious Supplier Forum, recently presented an IFA Lunch & Learn webinar session entitled, “Revisiting Your Candidates Financial Requirements in Today’s Environment.”
As for the Lunch & Learn webinar presenters, Eric Schechterman, Benetrends’ chief development officer, teamed up with Dallas Kerley, managing director of FRANdata, to share their insights on this pressing issue about getting funding for franchisee candidates. It’s top-quality information for franchisors everywhere:
- The current lending environment of the SBA, and other financial institutions
- How today’s lending strategies impact franchise development
- Strategies for emerging vs. established brands
- How to reorganize your candidate’s financial qualifications
- The impact of multi-unit deals on financing
- Funding strategies beyond the SBA
Interest Rates Aren’t Going Up, They’re Returning to Normal
Appetites for lending definitely change with the times, so it makes good business sense to review the current environment. Of note: the prime lending rate has exceeded 5.0% for the first time since 2008, but the current range is historically accurate. Financial institutions are paying close attention to how franchisors fared during the pandemic period. Banks are still enamored of franchisors with 50 or more locations – for emerging brands to compete, it will require robust candidates with better credit ratings. Franchisors must be more thorough in vetting candidates, their financial requirements, and tolerances.
On Liquid Capital for Current SBA Loan Candidates
Here’s a good rule of thumb for candidate financial requirements on SBA funding. For candidates only interested in a single-unit franchise, take the total project cost and make sure they have at least 40% in liquid assets. For multi-unit candidates, total all franchise fees and make sure they have two times over this amount in liquidity. It’s advisable to have multi-unit owners get their second location up and running quickly.
Franchisor Funding Scores
The SBA Franchise Directory is a great reference for lenders to determine if a brand is eligible for SBA financing, but the FRANdata’s Franchise Registry is utilized by lenders to determine if brands should obtain financing.
Strategies to Support Better Funding Outcomes
If you’re a franchisor, it’s imperative to establish funding partnerships with lenders/banks that have a favorable opinion of your brand. It’s advisable to have a robust pre-qualification system in place, as well as resources dedicated to offering a business plan template for candidates. Make sure all brand data is accurate and current in the industry space. Lastly, encourage your franchise development teams to provide coordinated training and resources for your teams to support the overall sales process.
This IFA Lunch & Learn Webinar has been archived, and you can view the full presentation by following this link.
To date, Benetrends has utilized their 401(k)/IRA rollover funding option to help more than 20,000 entrepreneurs secure the capital they need to fund the businesses of their dreams. We can help you pre-qualify or arrange an initial funding consultation to help you do the same. If you’d like to know more, simply reach out and contact us today!