How does a Veteran save time investigating the financial feasibility of their franchise acquisition?
How do Veterans find out if lenders are actually interested in financing the franchise brand they selected?
Simple: use the Franchise Registry:
The primary purpose of the Franchise Registry is to make lenders aware of franchise brands; however prospective franchisees, government agencies, educational institutions and industry experts can use the Registry site (http://www.franchiseregistry.com) to validate that a franchise is a viable and thriving company. One of the more difficult parts of getting financing is simply finding an appropriate lender. The Franchise Registry website serves the entire small business lending community; thousands of lenders use the site each month to find and underwrite franchise loans. The Franchise Registry lists every franchise in the United States. Powered by the FRANdata database, the Franchise Registry includes all brands franchising in the United States. Each brand has a franchising status and each franchise company listed shows if their units are eligible for SBA loans.
The Franchise Registry lists franchise systems whose franchisees enjoy the benefits of a streamlined review process for U.S. Small Business Administration (SBA) financing. Loan applications for franchises on the Franchise Registry can be reviewed and processed faster and more efficiently by the SBA and its lenders because the respective franchise agreements do not need to be reviewed in each individual franchisee situation.
This is because, through the Registry SBA Eligibility Review process, the SBA has already reviewed the franchise agreement and has determined that there are no unacceptable control provisions by the franchisor over its franchisees. Unacceptable control provisions could result in affiliation with a franchisor that is considered to be other than small; that would mean that a franchisee would not be considered to be a small business eligible for SBA financing.
A franchisor’s participation in the Registry SBA Eligibility Review process is voluntary. If a franchisor decides not to have its agreements reviewed through this process, the SBA or its participating lenders will have to review and evaluate each franchise agreement when a franchisee or potential franchisee in that system seeks SBA financial assistance. This can take considerable time. (However you should not construe a franchise system’s presence on or an absence from the Registry as either an endorsement by SBA or an indication of the franchise system’s quality or profitability.)
In order to have a brand listed on the Registry, a Franchisor must submit its Franchise Disclosure Document (FDD) to verify that the franchise. The Franchise Registry is where lenders come to do franchise financing. So as a prospective franchisee needing to open their unit, or when your existing franchise need to refinance, a franchisor included on the Franchise Registry will greatly expand the pool potential lenders who are interested to making the loan.
Lenders consider loan packages that do not have any information about the franchise system to be high risk and they are reluctant to make the deals. A Bank Credit Report from the Registry about your franchise system provides lenders the information they need to overcome their risk concerns. Endorsed by major lending institutions such as Bank of America, TD Bank, The Bancorp and others, Franchise Registry reports are beginning to be a requirement for franchise lending. Many lenders make it easy and fast for franchisees to get SBA-guaranteed loans by having their agreements pre-reviewed to ensure eligibility. Many lenders, in fact, require that agreements are reviewed this way.
So before Veterans gets too excited about franchise brands they should first ask if the brand is listed on the Registry as eligible for financing. Time is money, right?
FRANdata and Franchise Registry are trade names of Franchise Information Services, Inc.