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Monday, December 15, 2008

Daily Observations - Financing Franchises

Tonight I want to address the area of franchise financing. 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 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 a blog post 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

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 please sign up for your 10 FREE Special Reports to help you get your next commercial or business loan closed.

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