A growing number of franchisors are starting to realize that when they utilize a trusted funding partner to provide financing and more for franchisees, it can provide powerful benefits for the franchise system (as well as the candidate). These benefits include more unit growth, expansion into additional franchise markets, and the ability to alleviate candidates' fears in order to drive brands forward.
Multiple Funding Options = More Unit Growth
How many times have you heard a candidate say they were turned down for a loan by one or more banks, then they gave up? Allowing candidates to come up with their own funding can slow down the process, or worse, cause it to derail completely. On the other hand, when you refer a candidate to a funding partner, oftentimes they will discover a variety of funding solutions available. For example, one option a lot of people don't know about is being able to utilize 401(k) rollover funding for the capital injection necessary for an SBA loan.
You and your candidates need a partner that has the experience and expertise to design a customized funding strategy, specifically for your concept and your candidate. When your candidates can capitalize on the funding opportunities available to them, they have a better chance of buying into your system―which means you can capitalize on more unit growth.
A Proprietary Lending Program to Drive Expansion into More Markets
Although the structure can vary, a proprietary lending program typically involves a funding partner working with one or more banks to set aside a certain amount of money to be used exclusively to fund your concept by providing loans to your candidates. Your concept is “underwritten” and the lender becomes well-educated regarding your franchise: how it works, why it works, what makes a location successful, what obstacles can be avoided or overcome.
Because the partner bank has vetted your system and has detailed knowledge of both the costs associated with the average project and the typical benchmarks for your franchisees, the approval process is much faster than the normal practice of allowing a candidate to go to their local bank or lender where they need to educate a loan officer who is not familiar with your franchise for a loan.
Having a program partner gives you much more control over the funding process. You know your lending partner and they know you; therefore you can have a frank and candid discussion should any problems arise that need to be addressed. In addition, because your lending partner knows the credit criteria which must be met to obtain a loan approval, prequalification is much quicker and can save you from wasting your valuable time should a candidate be determined to be 'unfundable'. This knowledge also enables your program partner to properly interview your client, determine ways to mitigate any weaknesses in the application, and recommend the most appropriate approach to funding which will provide the greatest probability of getting your franchisee’s funding request approved.
One often overlooked advantage of a program like this, is the ability to advertise “Financing Available”. To illustrate how powerful this phrase can be, imagine how many cars Ford or Chevrolet would sell if the dealers relied on their customers to get their own financing. There is a reason all car manufacturers offer financing…because it helps them sell more cars. Recognizing that this works well for companies across different industries, it may be worthwhile to consider whether you could award more units and expand more quickly if you were able to offer financing to your prospective candidates.
As franchise executives continue to look for ways to accelerate their growth in a highly competitive industry, finding a trusted partner is not only smart ―it's essential. The right partner can simplify the funding process for candidates, so that you can set your brand apart from competing brands and catapult your franchise system's growth.