Restaurant franchisees, rejoice: The task of applying for expansion capital is about to get a lot easier.
Or at least that was the promise aired at the International Franchise Association's Small Business Lending Summit, which is still underway as I write this. The first two hours brought repeated mentions of a possible standardization in the forms restaurants and other small businesses use in making their case to a bank or other lender. Speakers were sketchy on the details, but they spoke of a lending application template that would be accepted as a rule by funding sources--enabling restaurateurs to fill out a single form for multiple lenders, instead of having to plow through a separate stack of paperwork for each.
"This gives you the ability to walk into any bank in the country with a template for lending. This is the one document that everyone can use, at their disposal," said Richard Hunt, president of the Consumer Bankers Association.
Standardized resources are also being sought on the lender side to facilitate the process. "From a lending standpoint, there are a set of tools that are being developed that are coming out in the next 45 days that will change franchise funding," explained Darrell Johnson, president/CEO of the franchising research firm FRANdata.
He explained that the IFA and associated organizations are setting up a way for lenders to get performance data for 3,300-plus franchise brands. If an applicant is seeking funds to open outlets of a particular brand, the bank can see how that concept has fared.
I'll post more details as they're revealed here at the conference.
Showing posts with label restaurant financing. Show all posts
Showing posts with label restaurant financing. Show all posts
Tuesday, April 17, 2012
Thursday, April 7, 2011
Easy way to get loans for franchisees?
The International Franchise Association didn’t over-promise in pitching its Small Business Lending Summit as an opportunity to hammer out solutions to restaurant franchisees’ capital crunch. A packed room of attendees heard repeatedly today that lenders would extend loans more readily if applicants’ franchisors provided detailed data about the brand’s overall performance.
Bank representatives said the rusted machinery would be greased significantly if brand headquarters shared such nitty-gritty info as long-term sales plans, what failed stores are fetching when they’re sold, and what HR support is available to franchisees.
Several noted that medical-related small businesses are having an easier time than restaurants and other franchised businesses in securing growth capital. “The reason is there’s a tremendous amount of data available in that sector,” said Joe DiNicola of Bank of America.
“Today’s underwriting is different than yesterday’s underwriting. When the story can be supported with the franchisor’s data, that story becomes stronger,” he asserted.
The discussion prompted one member of the audience to grab a microphone and suggest that franchisors put systems into place and standardize the information they pass along to potential sources of licensee loans.
The give-and-take grew out of what panel moderator and celebrity business journalist Geoff Colvin called a “giant disconnect between lender and borrower.”
He noted that the conference was convened because franchisees are starved for financing. Yet lenders on the program attested that they not only are willing to lend more money to franchisees, but are aggressively prowling for those sorts of deals.
Ironically, they asserted that a major part of the problem is insufficient demand.
“We’re seeing a lot of hesitancy,” said Mary Navarro, a senior EVP for the Midwest’s Huntington Bank. “A low sales volume might be part of that hesitancy, and [franchisees] have learned to do more with less.”
The discrepancy between franchisees’ complaints and lenders assertions had Colvin scratching his head. He asked Navarro, “What explains the perception that franchisees can’t get credit?”
After some give-and-take, lenders acknowledged that they’re using different criteria post-Great Recession to decide who gets money. They’re looking for a convincing track record and far more detailed information about the ventures they back.
“Document, document, document,” advised Tony Wilkinson, CEO of the National Association of Government Guaranteed Lenders.
Banks are also looking for an on-going relationship, not a one-off transaction. Her company is loath to make one-shot loans because it wants to lend money on an ongoing basis with businesses in the neighborhood.
A representative of Regions Financial Corp. suggested that franchisors choose a dozen banks nationally, educate those institutions about their concept, and then work exclusively with then.
Pens were scribbling furiously as she spoke. I bet the notation was starred and underlined a few times.
Bank representatives said the rusted machinery would be greased significantly if brand headquarters shared such nitty-gritty info as long-term sales plans, what failed stores are fetching when they’re sold, and what HR support is available to franchisees.
Several noted that medical-related small businesses are having an easier time than restaurants and other franchised businesses in securing growth capital. “The reason is there’s a tremendous amount of data available in that sector,” said Joe DiNicola of Bank of America.
“Today’s underwriting is different than yesterday’s underwriting. When the story can be supported with the franchisor’s data, that story becomes stronger,” he asserted.
The discussion prompted one member of the audience to grab a microphone and suggest that franchisors put systems into place and standardize the information they pass along to potential sources of licensee loans.
The give-and-take grew out of what panel moderator and celebrity business journalist Geoff Colvin called a “giant disconnect between lender and borrower.”
He noted that the conference was convened because franchisees are starved for financing. Yet lenders on the program attested that they not only are willing to lend more money to franchisees, but are aggressively prowling for those sorts of deals.
Ironically, they asserted that a major part of the problem is insufficient demand.
“We’re seeing a lot of hesitancy,” said Mary Navarro, a senior EVP for the Midwest’s Huntington Bank. “A low sales volume might be part of that hesitancy, and [franchisees] have learned to do more with less.”
The discrepancy between franchisees’ complaints and lenders assertions had Colvin scratching his head. He asked Navarro, “What explains the perception that franchisees can’t get credit?”
After some give-and-take, lenders acknowledged that they’re using different criteria post-Great Recession to decide who gets money. They’re looking for a convincing track record and far more detailed information about the ventures they back.
“Document, document, document,” advised Tony Wilkinson, CEO of the National Association of Government Guaranteed Lenders.
Banks are also looking for an on-going relationship, not a one-off transaction. Her company is loath to make one-shot loans because it wants to lend money on an ongoing basis with businesses in the neighborhood.
A representative of Regions Financial Corp. suggested that franchisors choose a dozen banks nationally, educate those institutions about their concept, and then work exclusively with then.
Pens were scribbling furiously as she spoke. I bet the notation was starred and underlined a few times.
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