1851

There&#8217;s a rudimentary understanding that franchising has initial costs and in order to succeed: The capital must exceed the cost. Initial franchise fees are spelled out in the contract; but oftentimes, those costs don&#8217;t include operating fees, inventory and any updates or structural changes needed to meet corporate standards. Banks, investors and a number of other resources like lending institutions have their own lists of qualifications that candidates must meet in order to receive the necessary funding, so what route do you take to find the proper loan? CEO and co-founder of <a href="http://www.boefly.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-much-cash-do-i-need-to-buy-2463" target="_blank" rel="nofollow" target="_blank">BoeFly</a>, Mike Rozman, helps pair small business owners with lenders in order to make sure both groups are getting the most &#8220;bang for their buck,&#8221; so to speak. Understanding the industry from the inside-out helps give insight on the way new and existing business owners can best be positioned for a loan. It all starts at the base with liquid capital. &#8220;Typically banks like to see an owner inject 20-25% of the total project cost out of their own funds,&#8221; said Rozman. &#8220;This is the bank's best way to ensure that their borrower has 'skin in the game'.&#8221; Banks want to understand the risk of making a loan to a business owner, but that risk is a two-way street. With a percentage of the business owner&#8217;s funds at stake, the lender and business owner are both partially responsible for the outcome of earned profits. The idea is to build trust between the two parties, and unfortunately for franchisees, the banker is the skeptic. Positive positioning through proper preparation is the only way to ensure success. &#8220;The most important step for a new franchisee is to understand where they stand today,&#8221; said Rozman. &#8220;I often think that the process of getting a loan is a lot like an open book test. You should know the banker's questions, and how your answers might come across, before they ever get asked.&#8221; The brand's that rely on BoeFly recommend, and in many cases require, that the franchisee get their bQual, a BoeFly proprietary report that instantly gives the franchisee information on how bank's will judge them, according to Rozman. &#8220;Every bQual includes the franchisee's FICO credit score and the same credit score required by SBA lenders - the FICO SBSS score,&#8221; said Rozman. &#8220;The good news is unlike applying for a loan at a bank, bQual doesn't impact the franchisees credit. With this information they understand what their financing path will be like.&#8221; There are also loan options catered specifically to first-time franchisees and finding the right partnership can be made easier with a little guidance. BoeFly has consistently seen positive results using SBAs to fund new franchisees. SBAs are essentially partners dedicated to helping start-ups with financing, although they don&#8217;t discriminate against existing business owners. It&#8217;s important to keep in mind, multi-unit owners seeking financial assistance are at an advantage because banks are almost always more comfortable making a loan to a business owner that has a proven track record, according to Rozman. &#8220;It is easier to get a loan once you have multiple franchise units- assuming of course that they are successful,&#8221; said Rozman. Whether a multi-unit franchise owner or a new owner, review all possible options before jumping into an agreement with a lender and remember to look at timelines. Resources like BoeFly help craft an accurate financial picture and remind owners to keep an open mind when comparing and contrasting contracts in order to save a lot of time and stress as the business gets up-and-running.

1851 Franchise

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