Franchisor-Assisted Funding | Franchise Beacon

Government Shut Down Affects Business Lending

Michael A. Peterson — Tue, 22 Jan 2019 03:33:45 +0000

In the United States, many loans are in some way government backed or guaranteed. Small businesses receive SBA guaranteed start-up and working capital loans, service members receive VA backed home loans, and teachers receive down-payment assistance through the Teacher Next Door program. The fact is the government is in the lending business.

Franchisee Funding Affected by Government Shutdown

What happens then, when the government shuts down? Taking all politics out of it, what is the effect for the small business owner? SBA loans are a go-to source of franchisee funding, whether for start-up or working capital. The SBA does not provide the money but may insure up to 90% of any loss that a lending institution experiences from an SBA-backed loan. If the Small Business Administration where to no longer offer these programs, we would be having a different conversation. Lenders would find a way to become comfortable in a lending environment that did not provide such guarantees. However, with the assumption that the government will at some point resume normal operations, most loans that would normally be back by the SBA simply are not being processed. Mark Zandi, Chief Economist for Moody’s Analytics, recently stated that the government shut down his already stalled over $2 billion in small business loans. Franchise Beacon is not here to tackle a $2 billion problem. If your franchisee funding is not affected by the government shutdown, this is strictly an academic question. If you have franchisees that were counting on that money for expansion, payroll, or other immediate cash flow needs, it’s an all-encompassing question. If you’re in the former group, the Wall Street Journal did an interesting article about the effect of the shutdown, as did Inc. Magazine. You will likely find these articles very informative and will be better educated about how the SBA lending system works overall. If, however, your system is being affected directly by a lack of available capital, whether due to the government shut down or otherwise, we’re here to help. Our unique franchisee funding program allows you to provide capital to your franchisees through a variety of different financial vehicles. These vehicles do not have government involvement, and your franchisees can use them for growth, emergencies, or any other reason. If you are one of the real companies that are reflected in that $2 billion number, let’s talk! Using the links on the right-hand side of this page, give us a call, send an email, or schedule a consultation.

Asset-Based Lending, an alternative to bank loans

Michael A. Peterson — Fri, 11 Jan 2019 07:47:42 +0000

Where Did This Money Come From?

When you first start looking for funding as a small business owner, the lack of options can surprising. After all, when you first opened your business, especially if it was a franchise, you probably had lenders ready to hand you funds at the drop of a hat. Then, you discovered the world of alternative financing! Suddenly what was amazingly underwhelming became surprisingly overwhelming. You began hearing terms like factoring, working capital advance, or equipment leasing.Perhaps, you also heard Asset-based lending. Asset-based lending, or ABL, is a line of credit given to a business which is secured by a specific set of collateral.

Most Loans are Secured, Right?

ABL seems like a bit of a misnomer since, with very few exceptions, small business loans are collateralized. The difference is that with an asset-based line, the lender is looking at the realizable value of the liquidation of the assets used to secure the loan. Interestingly, unsecured loans often have a lien across the entire business, whereas asset-based lines typically are secured by the specific assets agreed upon.

Should You Use ABL?

Different types of lending work for different businesses. ABL funding is no different: it works for businesses that have fairly significant equity in hard assets, and either are not quite at the point of bank financing, have exhausted their bank lines, or desire to hold their bank lines open for day-to-day capital needs. Very young, start-up businesses typically will not be able to secure an ABL line. In the franchising space, ABL is typically going to be more geared towards the franchisor than the franchisee. If you are business with credit history, hard assets such as inventory, equipment, or real estate, and you have the opportunity to use new funds to grow your business, ABL should definitely be something you’re considering.

Funding the B2B Space

Michael A. Peterson — Mon, 07 Jan 2019 04:25:20 +0000

The B2B franchise space has a tendency to be high margin, attract top-notch franchisees with strong sales and/or executive backgrounds, and enjoys a long history of success. Of course, as a franchisor in this space, you already know that. You also know the other side of the coin; that a service-based B2B franchisee can quickly get bogged down with receivables. What’s more, the more successful the franchisee is in the early days, the more they get tied to their AR, hampered by cash-flow, spending time on collections instead of selling, and likely becoming discouraged because their success is breeding frustrations instead of profits.

Sound familiar? Do you feel like you should bring a solution to your franchisees, but not sure what that solution is? Perhaps we can help!

Because we come from both the franchising and funding world, we both understand the frustration and understand the solution.

With the solution we bring to the table, we arrange for the funding, but it comes from you. By using a white-label product it is you, the franchisor, who is bringing the solution. You are the one that is allowing your franchisees to grow instead of being shackled to AR. You are the one getting your franchisee past that growth wall and into the next stage of their business.

As a serendipitous benefit, all AR funds now run through you, to your franchisee, allowing you the chance to take your royalties, ad funds, and other fees prior to passing the remaining through. So not only are you eliminating a headache for your franchisees, you are eliminating one of the biggest headaches for franchisors!