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How To Fund A Franchise With Shirley Kefgen

by | Jul 19, 2022 | Podcast

FM 5 | Fund A Franchise

Having funding is a critical factor in starting any business. So, how do you fund a franchise? Here to help you out is Shirley Kefgen, Director of Business Development at FranFund and one of the top franchise funding consultants in the country. In this episode, she walks us through the various ways to fund a franchise. From how to use funds in a 401(k) without having to pay taxes or early withdrawal fees to loans through the SBA, Shirley covers it all and takes through the pros and cons of each strategy. Listen to her chat with host Dru Carpenito and get practical, valuable tips you can use for your business.

Listen to the podcast here

 

How To Fund A Franchise With Shirley Kefgen

Welcome to the show. I am extremely grateful and happy to have one of my favorite people in franchising on the show. She’s an amazing person. She’s also super knowledgeable of all things franchise funding and financing. She’s done a bunch of other cool stuff that we’re going to talk about. Shirley Kefgen of FranFund, welcome.

Thank you for having me. I’m excited to be here.

I’m glad to have you here. I was down to Florida with a few of our colleagues that we know. I can understand why people move to the nice parts of the country.

That 355 days a year of sun thing doesn’t bother me too much. I’m into it.

Did you move from Michigan down there?

I did where we experienced a whole lot of grays. It was a nice shift.

Could you ever go back?

I go back to visit very often. I do that a lot and I have young nephews. I do experience the winter. I get back for Christmas every year but I enjoyed being from Michigan and living in Arizona.

I grew up outside of Philadelphia and we had four seasons. Not like Michigan intense but we had a couple of inches of snow on the ground consistently. You learn to drive in the snow and all that stuff. I’ve been in Charlotte for sixteen years and I don’t think I could ever go back. My body has changed.

I did six years here in the Phoenix area and then I moved to Nashville for a year. If I had gone from Michigan to Nashville, I never would have left. I happened to hit Nashville in a rough winter. It was very gray. It was snowy. My car got iced into the parking lot at the airport and I came home. It was ice all over my car. I decided that Nashville and I were going to break up and remain friends. I came running down the deserts.

 

FM 5 | Fund A Franchise

Fund A Franchise: We get to know the franchisors in our network really well so that we understand, franchise by franchise, what is the best way to make it happen and the easiest way to make funding possible.

 

That’s good because you don’t have the humidity out there.

We don’t. That’s a big difference too.

Do you get to work with folks all around the country with what you do?

Yes, which is nice because I learn a lot about what’s going on every year at any given time, so it’s fun.

Shirley, what is your formal title with FranFund?

Director of Business Develop.

She’s running the show. How many folks are you overseeing?

I oversee a department of 5 and then we also have another team of 2, almost 3 that we work closely with. My team focuses on working directly with candidates like prospective franchisees to help figure out the best path for funding. Not only what it does look like but, “Let’s go do it and implement it.” The other team of folks that we work closely with is getting to know the franchise awards in our network well so that we understand, franchise by franchise basis, what is the best way to make it happen and the easiest way to make funding possible.

You guys are all thing franchise funding. You get to know the candidates. You also get to know the brands, which a lot of times, you probably know more about the brands than the candidates do too, which helps in a massive way to find the deals because you know what their FTDs are like. You find the lenders that like the franchises, which is a massive advantage for anybody that’s thinking about funding a franchise.

It lets us paint a very clear picture of what it will look like. Not just, “Yes, you can get along for your business but for this franchise, it may look like this and for this franchise, it might look a little bit different. Here are the things you should expect.” It reduces some of, “I don’t know what I don’t know.” That can be a little scary, so I do think the best has been helpful.

 

Getting to know candidates lets us paint a very clear picture of what it will look like. For this franchise, it may look like this but for this franchise that might look a little different. Click To Tweet

 

You and your team are like the analogy of buying a house. You are like the mortgage loan officers that know but typically have a much broader perspective on not just using a mortgage. You can do the rollover for a business startup. You could also help people through their personal situations. Maybe there’s a home equity line that might make sense and then SBA loans. You are across the board but very analogous to who you’d work with to buy a house in a way.

The first interaction is about what you could think about Mr. or Mrs. Candidate. What are all the different options that you could consider or the different combinations of ways to make this happen? It’s about funneling based on financial situation or preference based on the business needs. How much are we growing? How many future locations do we think we’ll have? What do we need to be planning for? All of that plays into what truly makes the most sense to make it happen.

You’ve been in franchising your entire career. Me as well, accidentally.

Me too.

What’s your story?

I’m from Michigan originally. TWO MEN AND A TRUCK, the franchise, is headquartered there. That’s where they started and grew from. On my first day at TWO MEN AND A TRUCK, I was doing some accounts payable admin-level basic things. A few months later, they said, “Shirley, we have a great opportunity for you. We’d love to move you into franchise sales and development.” My reaction as a very young person who didn’t know me as well as them who apparently knew me was, “Gross. No way. I’m not selling anything with you.”

Their reply was, “Yes, you are. It’ll be fine. We’re going to work this out.” Luckily, they knew a little bit more about my eighteen-year-old self than I did. It was great. It was a good fit. I was there for about eight years. For most of my time, I was in franchise sales and development. It was cool to go from less than 100 locations to approaching 200 and be part of that growth.

You were there for the run-up, like when the company caught its stride. For a lot of folks that don’t know, TWO MEN AND A TRUCK has become an iconic brand and franchise. Their story is amazing but they were the first ones in the moving space.

First national in the moving space. With woman-owned companies and family-owned operated businesses, I always say that I was fortunate to get my foundation and franchising there because it’s super high integrity and very high quality. We were doing c before anybody knew what ISO audits work outside of manufacturing.

What is an ISO audit? I don’t even know what an ISO audit is.

 

FM 5 | Fund A Franchise

Fund A Franchise: Rollovers open up another bucket of liquidity that you would not have had access to otherwise but it still lets that money maintain a tax-deferred status the whole way through.

 

It’s like, “Let’s look at all your processes and pick them apart. Put them back together and make sure that everything is as efficient as possible.” In early 2000, you didn’t see a lot of non-manufacturing businesses doing things like that. I’ve got a strong foundation there.

This company, if you ever look them up, produces more system-wide revenue than you probably would ever think. It’s a simple name with a simple logo but behind the scenes, there’s some pretty impressive stuff going on. Don’t they have a big technology play as well?

They do. They’ve got a huge corporate office that is customized for a moving experience. You get trained in a house that they have built inside your corporate office. It’s very cool. I was there for eight years. I loved it but they did not have remote employees. I had my fair share of snow, so I left the job and company that I loved and moved out to Arizona, where I still am. When I landed here, within a couple of weeks, I started working for a company called SYNERGY HomeCare.

For folks who don’t know, when you hear homecare, what that usually means is that the business owner, the franchisee, is hiring caregivers to go into the homes primarily of seniors to help with activities of daily living. A lot of times, it’s non-medical. That’s the space that I was in but I was there for almost five years. I was in franchise sales and development, so I started helping people do that stuff.

That was the infancy of senior care and franchising. SYNERGY was one of the companies at the beginning of that trend and then it’s become a little bit of a different industry. It’s still massive but a little bit more competitive than it was back then.

I’ve experienced a lot of growth in those five years. That industry is still booming. If you’re getting older, those services are not going anywhere. It was through that experience at SYNERGY that I met the folks at FranFund because 85% of the people that I helped become franchisees there used FranFund for their funding.

When I decided it was time to make a change, I called them and said, “I don’t know if you’ve ever thought about this or if you have room for me but I decided that my next move was a FranFund. What do you think?” Their line was, “The timing is great. We have an interview scheduled for a fund consultant on Thursday.” I don’t know what was wrong with me but my reply immediately was, “That’s great. Do you think you would cancel that?” To which I got a no but years later, here I am and it worked out all right.

You are one of the early on employees at FranFund too.

Yes. I was employee 7 or 8 and then we’re 40-ish somewhere in that neighborhood. I have had a knack for finding younger companies in a growth phase and being able to jump in and join. It’s exciting and fun. I love what I do.

You’re running the show over there with your team.

 

The rollover for business startups is a strategy that allows you to access money that you have in a 401k from an old job, or maybe an IRA that you’ve rolled money into. There are lots of different account types that will qualify. Click To Tweet

 

We do. We have a team of founding consultants across the country. FranFund is a referral-driven business. We’re about 98% referral driven. We don’t do a ton of advertising. My team is working with candidates every day where the franchise owner says, “We love you but let’s make sure you can do this. It’s time to make sure we’ve got your funding lined up.”

A franchise consultant who is trying to help someone identify brands started to say, “Let’s make sure we have this data point in the mix here, as we are figuring out what could be the right fit for you.” Being a funding consultant myself and growing into a role where we’re managing and growing a whole team there is fun. I enjoy what I do.

It’s different every couple of years. There is this handful of new waves of franchise companies that come through and nobody sees them coming. Even when you first hear about them, you’re like, “I don’t know. Is this the one that’s going to take off?” It’d be like Premier Martial Arts. Nobody saw PMA coming. I don’t think. You’ve played a significant role in helping a lot of people get into PMAs.

That specifically has been a fun brand because we were right there at the beginning of their growth and franchising. They also were an organization that had some legacy folks that joined their franchise system immediately. We’ve been able to help some of them open 2 or 3 locations as we’ve been helping other folks get in for the first time. That has been explosive but very exciting for sure.

Premier Martial Arts, for anybody who hasn’t heard of them, is franchising and professionalizing martial arts. They’ve become the first national franchise brand, I believe. They have 700 license units sold and 100 open. They’re opening more every month. It’s a pretty incredible story with what they’ve been able to do. You helped a lot of people. Every time I call you up, I say, “Shirley, what are you seeing come across your desk a lot?” It’s been PMA for the past couple of years.

You’re managing the team and still working with some folks. Go to Shirley because she’s amazing. The other team is amazing too, as well as everybody else on the team. We’ve known each other for a long time. We’ve been leading the charge for the past years. I’d love to get into some of the nuts and bolts on the different funding options and stuff because you nailed it. Funding isn’t the funniest topic in terms of what we get to do when people are buying a business or stuff like that but it is probably the most important.

At least 50% of the battle is coming to the table with the right funding strategy to help fuel your growth. I’d love to get into some of the nuts and bolts a little bit on what you’re seeing with some different funding options and helping folks. There’s one product that you specialize in that a lot of people, when they first hear about it are like, “What is this rollover for a business startup? I don’t get it.” Could you talk to us a little about what the rollover for a business startup is?

All the people call it ROBS. It’s the one time the government gets creative but what this strategy allows you to do is access money that you have in a 401(k) from an old job or maybe an IRA that you’ve rolled the money into or maybe you’re a retired military, so you have a TSP. There are lots of different account types that will qualify. They need to not be connected to a current job. If you’ve been at your job for ten years and you’re not leaving, that 401(k) at your current job is very likely not going to be accessible.

What this program lets us do is access that retirement money and instead of having it invested in Sony or Best Buy stock, you can invest it in Kefgen Enterprises, Inc., if it was my business or whatever your business ends up being. It’s still considered to be a qualified retirement investment. The money’s not going in your pocket where you pay taxes or penalties. It essentially opens up another bucket of liquidity that you would not have had access to otherwise but it still lets that money maintain its tax-deferred status the whole way through. You and the business are not paying taxes for getting access to those funds.

It feels tax-free but it’s tax-deferred. That’s the proper terminology.

 

FM 5 | Fund A Franchise

Fund A Franchise: The retirement plan 401(k) that we create up front, we’re not only using it to invest the money into the business. It’s a real retirement plan, for continued tax-deferred savings moving forward.

 

That is right. There’s no tax evasion going on here. The money that you save without paying taxes upfront is maintaining that tax-deferred status, even though it’s invested right in your business.

The retirement plan owns the stocks of the business, essentially.

We ended up creating a C corp that becomes the operating entity for the business. We then create a new 401(k) that the corporation sponsors. We’re rolling retirement money into that new 401(k) and then that 401(k) is using that money to buy stock in this corporation instead of buying stock in Best Buy. I always say to folks and it sounds a little weird but you want to try not to think of this as you’ve borrowed from or against your retirement plan. It’s more like your retirement plan is your silent partner or investor in this company. It owns the stock in the business and it’s still your 401(k). It’s a better way to look at it than trying to compare it to investment.

It’s probably one of the most attractive ways to invest in a business truly. C corp is the same setup as Bank of America that’s publicly traded. The entities are very similar, if not identical. Technically, your retirement fund owns that stock, which means you will have the potential control over the returns much better. You can’t do that and buy a boat. There’s a qualified use of how the retirement fund has to invest that money to maintain its status.

The money does have to be spent on business expenses. If your business is a boat taxi, then sure, we can buy a boat but otherwise, it’s probably not going to fly.

It’s not the intent of the government because you don’t have to pay penalties either. You’re not paying any early fees or taxes as long as you maintain that status. There’s some compliance which is why working with a company like FranFund and Shirley to help get all this stuff set up the right way is critically important.

That’s the thing. We do facilitate this whole process. It’s regulated by the IRS and the Department of Labor. Nobody wants to build that alone, which is perfectly understandable. We do provide an ongoing administration service because of the retirement plan and 401(k) that we create upfront, we’re not only using it to invest the money into the business. It’s a real retirement plan for continued tax-deferred savings moving forward. You’re right. There is some compliance, administration and reporting that needs to happen relative to that plan but we do take care of all of that.

A lot of people ask me this question, do they need to pay back that money eventually?

You don’t pay it back alone because they didn’t borrow anything but let’s say you sell this business ten years down the road or whenever the time is running. Like in the sale of any other business, you set your asking price and negotiate with your buyer. It’s in your control but then also, like in the sale of any other business, you take the proceeds from your sale and divide them among your company shareholders. If we only have one shareholder and that shareholder is your 401(k), then 100% of the proceeds from that sale are going back into your retirement plan, pre-tax but still tax-deferred.

Someday, when you’re past the age of 59 and a half and you pull money out of that account, you’re going to pay your regular taxes like you always would have. You’re not avoiding tax. There’s no tax evasion or anything that’s not above board happening here. It’s maintaining that tax-deferred status the whole way through.

 

Having additional working capital upfront buys people, the time and the flexibility to make good business decisions and to not panic. Click To Tweet

 

If you got into a franchise at the age of 50, built it for 9.5 years, sold it and use the ROBS program, that money then gets refunded back into your 401(k) plan but if you’re of the age, then you can start to access it without having to pay penalties. You can pay tax at the, hopefully, lower-income bracket at that point after you sold the business.

The other thing is if you’re 40, let’s say, toll over $75,000 and maybe bring in $25,000 from your savings account. When we look at shareholders, your 401(k) owns 75% of the company stock but then you, as an individual, own 25%. It’s important to have that money in your pocket at the time of the sale. There are strategies like that we can look at, so maybe you own some stock and your 401(k) own some stock. Split those proceeds when you sell the business.

Do you see people using the ROBS in conjunction with an SBA loan a lot like that would be their liquid cash injection? Can you talk to us a little about what the SBA funding process looks like?

With the ROBS program, when startup costs are in maybe the $150,000, $175,000 area or below, it’s pretty common to see folks fully funding their business with that strategy. Once you start to get into maybe $200,000 territory and above, then it becomes pretty common to see a combination of maybe some retirement money plus an SBA loan. For a little bit of context for anyone who’s not familiar with it, SBA stands for Small Business Administration.

It’s an arm of the Federal Government. These loans are not coming from the government. They’re still coming from traditional banks and lending institutions but from a structure perspective, the loan goes in the name of your business. You then, as an individual, sign a personal guarantee. That personal guarantee says, “No matter what happens with this business, I’m responsible for making these payments myself.”

The Small Business Administration signs a secondary guarantee which says, “If it is impossible for the business or you as an individual to make the payments that you promise to, the government is shifting 75% of that debt from the bank that wrote you the loan to the Small Business Administration.” The money is still coming from banks.

It’s just that these banks have an extra insurance policy if you will. No matter what happens, they’re getting most of their money back and so because that exists, we found that banks have become incredibly dependent on those SBA specifically. They want that government guarantee. Most of the time, especially when you’re looking to open your 1st or 2nd location of the business, if we’re talking loans, we’re pretty specifically talking SBA loans.

The SBA has done a good job of incentivizing and getting banks comfortable. When we say banks, it’s not all banks. We’ll probably discuss going down to your local bank and talking to a banker about an SBA loan versus talking to you about an SBA loan because there’s a big difference. The point is that the SBA has done a good job of continuing to incentivize the banks to be comfortable lending to people for a startup business, which notoriously is perceived as a high-risk deal but it gets into a little bit too of why certain banks like certain franchises.

Not all franchises because, like anybody who’s reading and doing research on a franchise, it’s pretty easy to distinguish some of the good ones from some of the not-so-good ones because of what’s disclosed in the FDD and all that stuff. Is there a handful of banks that you work with that like franchising and are comfortable with the SBA stuff? Is it any bank? If I walked down to my local bank and say, “I’m Dru. Can I talk to an SBA lender and tell him to get a franchise,” is that a smart thing to do?

You, statistically speaking, have a less than 38% chance of getting your loan done. If you do that, race on nationwide SBA approval rates is a little bit less than 38%. My team is more in the 98%-99% area. It’s because we go through a thorough preapproval process with our candidates. We understand their financial situations but also we’ve developed a network based across the country. Not all of them understood the benefit of franchising when we got introduced to them.

 

FM 5 | Fund A Franchise

Fund A Franchise: These loans are not coming from the government. They’re still coming from traditional banks and lending institutions. But from a structure perspective, the loan goes in the name of your business.

 

We’ve even done a lot of work to help them understand the difference between someone coming to the table who doesn’t have industry-specific experience and is opening a franchise versus someone coming to the table who doesn’t have industry-specific experience and is planning to do it alone. It doesn’t mean that one is right and what is wrong. It’s not that but there’s a difference.

There’s an extra level of support. There is marketing, advertising and technology. Even industry-specific knowledge and insight can be gained a little bit quicker with a franchise system. We have banks that have become very comfortable with franchising as a model. It does help when we are pushing these loan packages through. We’re not getting that question of, “This person has never been in this industry before.” That can be, believe it or not, a big hurdle if you do walk into a local bank.

Is that one of the SBA clauses or is that a bank typically?

If you walk into your local bank, they could very well say, “I’m sorry. You need to have the industry-specific experience to get an SBA loan.” That’s their policy but that doesn’t mean that that’s an SBA policy. The other thing that gets very interesting about this whole world is it’s much easier for a bank to say, “We can’t work with you because the SBA said so.” It is for a bank to say, “We are not interested in your loan.”

There are lots of times when I will be on the phone with somebody who’s like, “I’ve talked to these three local banks and this is the feedback I’m getting.” They’re pulling apart what is truly an SBA requirement versus what that specific bank happened to prefer because big preferences and appetites will vary greatly.

You don’t know what you’re going to get when you walk into the local bank. Maybe they do 1 or 2 SBA deals a year. For a franchise, they’re not as well versed in it as you are doing this every single day. You have a team of 40 people that have probably seen about everything that you could see, especially when you’re thinking through the multiunit strategy of like, “Let’s talk about how to fund this first unit,” but there’s a lot of folks that ended up wanting to invest in open multiple units over time, which opens the door for a longer-term strategy to be in consideration with. When you’re working with folks on the multiunit side, can you talk to us a little about some of the different things to think about when you’re putting together the funding strategy?

It always becomes an interesting conversation because if we are going to look at an SBA loan, even if the SBA lender knows that the plan is to open multiple locations of a business, they focus on the first location when they’re writing the loan. With some businesses that don’t necessarily require a physical location for your customer to come to, maybe it’s more of a service business where you or your employees are going to go to your customers to provide your goods and service, sometimes in a scenario like that, you can centrally operate 2 or 3 different territories.

We can maybe package all of that into one loan but if for a moment here we’re talking about a restaurant or a martial arts studio, if we’re looking at a business where customers need to come to your physical location, then things are always going to break it up on a location-by-location basis. This is one of those things where bank preferences can shift. At this moment, banks out there are not comfortable with the idea of 1 loan to open 2 locations simultaneously.

They also are not in love with the idea of writing 2 separate loans simultaneously for 2 separate locations to be open at the same time. We will often suggest an SBA loan for the first one. That’s the easiest time to get an SBA loan. They’re not looking for cashflow and profitability. We don’t have to submit tax returns because we don’t have them yet. Preserve your liquidity. Go get the SBA loan for the first one. If an SBA lender is not ready to jump on board by the time you’re ready to open the second one, we preserved your liquidity. Let’s go get that one open.

That should leave us with options by the time we get to the third because we’ve given the location a little bit longer. That’s not necessarily the perfect strategy for everyone all the time but the thought pattern of, “How do we make sure we open all of these as we’re getting the first one open,” is important to be thinking about early on.

 

Keep an open mind if an SBA loan isn't the best product for you. That's just a product that's out there and it's not always the best one. Click To Tweet

 

You used the keywords to preserve liquidity for the multiunit play. In general, people have different financial philosophies but when you’re starting a business, that’s a good philosophy to go by too. You can’t go wrong if you’re going to preserve liquidity. Who knows? It could be an opportunity. You might need more working capital or your neighboring franchisee comes on the market. They want to exit and are ready to sell. Maybe it’s a quicker way to get to where you want to get to and be able to have the means to pull something like that off. It gives you more options.

It sounds so silly but I’ve never seen a business closed because they have access to too much capital. You’ll probably hear a lot of people on my team say that a lot because it’s true. Sometimes people get worried like, “I don’t want to borrow too much. Maybe I should bump down my loan by $20,000 or 30,000.” I’m not sure that you should because you might want that working capital.

If you don’t, that’s okay. There’s no prepayment penalty with an SBA loan. That’s one thing that’s good to know with these loans. You’ll get a ten-year term. That’s standard and there are no prepayment penalties. If it makes sense for your business to pay the loan off early or pay down a chunk of the loan at some point, you have the ability to do that but having additional working capital upfront buys people the time and the flexibility to make good business decisions and not get panicked. My suggestion is always, don’t try to make it happen at the lowest startup cost you possibly could. Let’s estimate and be prepared for more so that you’re never stuck.

For a first-timer who’s looking at an FDD, it’s like, “The federal government says that the franchise companies only have to disclose 30 or 90 days’ worth of working capital.” You might need more than that to be able to withstand the startup because it might take longer for that business to get to a point where it’s breaking even or cashflow in itself. It’s one of those things where we’re talking to franchisees, funding companies and specialists like Shirley. You can get a pretty good sense of what the model on paper should look like and can make some assumptions about the good, better, best or bad ugly.

Sometimes with mortgages, people are like, “They said I could go buy a house for $1 million. There was no way I could afford that.” You see that happen. You get these crazy preapprovals that don’t feel real. That doesn’t happen in the SBA world. They’re not ever going to qualify someone for more than they can handle on paper when they demonstrated the ability to handle. Sometimes that’s a fear that gets carried over from the mortgage world a little bit but it’s not a fear that relates to SBA loans.

What is the typical qualification? If I wanted to get a $350,000 loan to open up Dru’s franchise, what qualifications would I need to have to qualify for the SBA loan?

Credit is a pass or fail category. It’s not like an 800-credit score gets you something better than a 700 does. As far as credit goes, we need to have a minimum score of 680. If there have been any bankruptcies, foreclosures or short sales, those items need to be at least five years old for most banks. Some banks might be able to get a little bit more flexible there. I would say at least five years old is a good threshold to keep in mind. Cash becomes another important category after credit.

What most banks will want to see is that the borrower is putting in about 20% of the initial investment. It could end up being a little bit more depending on the order of operations and what the closing checklist for the loan says. That’s something we can always dive into more detail about consult but 20% is a good number to keep in mind.

If your startup costs are $350,000, you should expect to spend $70,000 on business expenses. This is another area where it’s a little bit different than a mortgage because 20% on a mortgage means you’re giving the bank $70,000 to get them to hand over their loan. 20% on an SBA means you are physically spending $70,000 on business expenses and showing the bank that you’ve done that to get them to hand over their money.

There’s sequencing to all this stuff that is so important because if it’s a brick and mortar, then you have to help people with a certain loan product through the SBA for them to be able to use the loan for construction expenses versus an SBA express loan, which is the sub 150, you can’t use that money to fund or build-out.

 

FM 5 | Fund A Franchise

Fund A Franchise: Don’t try to make it happen at the lowest startup cost you possibly could. Let’s estimate and be prepared for more so that you’re never stopping.

 

What you’ll find too is when it is build-out. If we are looking at a restaurant, a childcare center or something where customers need to come to us like our physical location, the first disbursement of money from the bank goes to the contractor that we’ll be doing that build-out in construction. In that example, your $70,000, you’ve got to spend that on your franchise fee to get your franchise agreement executed. You’ve got to get your lease for your business location executed. Get your business insurance and architecture plans.

Your money in that scenario is being spent on pre-construction expenses and then we’re using the bank’s money for everything. If it’s a service business where we’re going to go to the customer, we don’t have that construction or build-out to worry about but maybe we need a truck or some equipment. We might be using some of that money to pay deposits for vehicles and equipment. We’ll use the bank’s money to pay the rest of those vehicles and equipment invoices. You’re right that it will look a little bit different and there’s a different sequencing depending on the business.

I’m learning stuff as I’m talking to you and I’ve been doing this for several years. I can only imagine. This is the value of working with somebody like Shirley and FranFund because they know these franchises. They funded many of them. Very rarely, you’ll be the first person to work with Shirley to fund the first franchise that they’ve seen because they’ve typically seen them all.

It is helping people understand why. It might cost a few thousand bucks but there’s a tremendous amount of value because if you try to tackle this by yourself, you’re probably going to screw something up and it won’t be a good situation. We talk a little bit through the multiunit and the components of the business, brick and mortar versus non-brick and mortar and what you need to get the business going. Do you have any stories of folks that have used your products that maybe come full circle? Any cool stories to share with anybody?

It’s interesting because we see it in both directions. There’s one franchisee of a service-based business. He and his employees are going to their customer’s locations by his business using the rollover program where he accessed retirement money. He did not go get an SBA loan. He owned his business. I believe it was a little over ten years and sold it for multiples of what he originally invested. All along the way, when the business was writing in my paycheck, he was socking as much of that as he could into his retirement account.

What started as a little seed did grow into a big tree. That’s the goal and plan for all of this. Those stories are fun and exciting because his goal was to set himself up for retirement and he did. He’s not working every day. He did exactly what he wanted. There are other folks though, in earlier stages of life where it’s super exciting to help them open their first location. A year later, I helped them get the loan to open the next one. Nine months later, we’re moving into a different franchise brand and how we fund this one.

I’ve been with FranFund for years of this franchising journey. There are people that I worked with years ago that I talked to say, “We want to do this. How can we do this? What about that?” It’s fun because I was so used to being part of a franchise system like being part of TWO MEN AND A TRUCK or SYNERGY. You know that there’s a family situation there.

All the franchisees know each other and the corporate team. They’re real relationships and you see each other year after year. Coming over to FranFund, that’s a big shift because I don’t have that anymore. These relationships last longer. They’re like, “You’ve gotten to my loan. Thanks. Have a great day.” It’s a nice part of being in this seat.

With the folks that you helped, you’re probably the only funding consultant they might ever meet in their life. They remember you and you did a great job. You helped them open up possibilities I’m sure that they never thought were possible. They’re off, build it and come back. That’s pretty cool.

I talked to a candidate of mine who left her job to get her business started. She was terrified because that’s scary for folks who have not been without a job before. It turns out that right before she made this decision and left her job, she was diagnosed with cancer. She said, “I need to get out of this work environment. This is the best decision and push.” She called me almost a year later to say, “This is awesome. I feel so fulfilled. I’m healthy. Life is good and I’m growing. How can we look at this next opportunity that I have?” I don’t know. Sometimes I feel a little cheesy but it’s real.

 

Don't get too attached to one funding option or another early on. Just be open to hearing about what's out there. Click To Tweet

 

This is people’s lives.

It matters.

The number of businesses you buy in a lifetime is not a lot. These are big life-changing events typically that we get to play a small part in, help people navigate through it and get hooked up with franchises that they typically thought we were crazy about when we first talked to them. “What is this one? Talk to Shirley. She funds these things all the time.”

My favorite is that so often, when they first get their list of franchises to consider, there’s one that’s like, “I guess I’ll talk to them.” It ends up being the right one and the best fit. It’s always important to keep it overnight to be willing to do the exploration.

It’s the types of businesses that make surprising amounts of money. It’s the level of sophistication like we talked about, even TWO MEN AND A TRUCK and the culture. They’re becoming a part of the family and getting inside this organization. When you start peeling back that onion one layer at a time, the good ones have multiple layers. They keep getting better and better every time on the back. Any other last thoughts around funding that you think would be good for folks to know?

My last thoughts around funding are similar to my thoughts around franchise exploration in general. Keep an open mind. If an SBA loan isn’t the best product for you, that’s okay. That’s a product that’s out there and it’s not always the best one. Maybe a home equity line of credit is a much better fit for you and that’s great. Ultimately, it’s all your responsibility. You’re signing a personal guarantee either way. A lot of the time, my thought is don’t get too attached to one funding option or another early on. Be open to hearing about what’s out there because that does allow you to figure out your best path forward.

Also, down the road too. Maybe you end up using a home equity line for this first venture and then there’s an opportunity to buy a building or get the real estate. You can call Shirley because there’s other SBA stuff for that too. Some amazing different loans are out there through the Small Business Administration. It’s super-valuable to know the options and build relationships with people that can help you when you need some help.

This isn’t scary once you learn about it. It’s scary when you don’t know anything. That’s the only time that funding is scary but once you get some information, it doesn’t have to be scary anymore. Let it be another data point in the process. That’s what it is.

You are at a good vantage point for people to hear from somebody else that other people are buying this franchise and people are using SBA loans to fund these franchises. You have so much coming across your desk and your team’s desk too. It’s cool. Shirley, I enjoyed it. I appreciate you coming on here and chatting with me.

It’s been fun. Thanks so much for having me.

 

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