Other Option to Franchise Financing
Incompro Capital Lending offers another option to Franchise Financing besides going to your local bank for a SBA loan. We have a relationship with a private investor that specializes in franchise financing. As you read below you will read that they can offer the optional SBA government backed loans or use a more conventional loan process. This lender has performed many loans for well know franchises like Midas, NAPA, Starbucks, Subway, and more.
If you have been turned down from your local bank for franchise financing then look at this alternative. If you meet the requirements below give Incompro Capital Lending a call today.
Franchise Requirements:
A. Required Paper Work
1. Purpose of loan (Summary)
2. Business History
3. 3 yrs business financial statements * for existing business*
4. Debt Schedule * Existing Business
5. 3 year personal taxes
6. Breakout of total project cost (Budget)
7. Copy of lease
8. Source of cash injection into business
9. Projections of income, expenses and cash flow (3 years) for new business
10. Personal Resume
B. The following is a sample of the types of businesses that are eligible for franchise financing programs:
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C. Typical time frame for decision
Each loan request is unique and may require additional information in order to give you the best opportunity for approval. How long it takes in large part is a function of how quickly you are able to gather requested information and get it to us. However, once we receive a complete application, we can generally give you a credit decision in 5-7 business days.
D. What is expected from a borrower?
- Good credit.
- Good character.
- Some equity in the business already or to put into the startup project.
- Income sufficient to pay personal obligations after the loan.
Please understand credit decisions are not an exact science. Approvals are dependent upon a combination of factors including but not limited to those listed above. Loan decisions are subject to a complete file, full underwriting, and loan committee review.
E. One choice of Lending
Minimum 7a loan is $100,000, although some lenders make much smaller loans. 504 maximums are $1.5mm for the second lien (It can be increased to $2mm when the project meets certain public policy goals, egg. Rural development or minority ownership, for example). Therefore, the 504 project costs can be higher, into the $5-6mm range and up.
For real estate loans the term may be 20-25 years. For working capital and leasehold loans, the terms will be between 7-10 years. Rates are variable, based on prime (7a) or labor (first lien on 504). The second liens for the 504 program are fixed for 10 or 20 years, depending upon the debenture sale rate once the project is complete.
F. They are not a Bank
Bank financing may be useful in providing financing for short term debt such as accounts receivable and working capital. Most bank loans for long-term assets are “mini-perms” which means that the term may be five years with a longer amortization. At the end of the five year term, the bank may renew the loan (or maybe not renew it at all, based upon its own set of problems or other agendas). At a minimum, if it is renewed, the interest rate at that time may need to be renegotiated. In addition, there may be renewal fees and costs for new environmental reports, appraisals, etc. These five year “balloons”, as they are also called, may happen at the worst possible time, such as during an economic slow-down or a time of personal financial hardship. Therefore care should be taken in assuming a bank loan will always remain in place.
Banks also typically require an ongoing debt coverage ratio minimum as well as minimum appraised values on real estate. Consequently, decreases in profitability or real estate values can trigger a default of the bank’s loan covenants despite a good payment history.
Today, some banks may have their portfolio full of problem residential or commercial loans and be unable to assist you because of liquidity issues or a shrinking credit box. If they can make the loan, they may require that you keep your deposits at their bank, thereby potentially limiting your ability to use your capital to the fullest.
Our loans are long-term loans without a call feature and do not have typical bank performance covenants. Interest rates do not have to be renegotiated. We are not a bank so you may choose where to deposit your funds. Once a loan is closed, it’s “done” and that’s the end of the uncertainties and future fees!
Need Help with Franchise Financing? Contact us today for a free quote! 971-219-8677
