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Access to Credit and Health Care Reform Raise Concerns

COHEN: “Primarily, I am concerned with my access to financing. Though my track record for paying back loans on my existing locations remains flawless, it has been of no use in procuring further funds for new investments.

Prior to the recession, financing was readily available despite my limited experience and collateral. Currently however, I have great difficulty in obtaining additional, desirable bank loans for locations that I know could be profitable right out of the gate. This is extremely frustrating not only because my financial growth is slowed, but also because my ROI diminishes significantly when I am forced to utilize more of my own capital to expand. In addition, I will have fewer potential buyers when it comes time to sell my investments if these financial conditions remain the same.

The solution to this issue lies without question far beyond my sphere of influence; in many ways I am simply stuck waiting for the economic climate to change or for the balances on my existing loans to dwindle. I’m hopeful that Togo’s recent engagement with Franchise America Finance and Bancorp will help me secure financing because now is the time to acquire and I am missing out on opportunities so long as I can’t leverage myself to the extent I wish.”

CURRY: ”Of the three issues noted above, financing/access to capital is the one that is of highest concern to me. Franchise growth has been slowed because of the difficulties in securing financing. The industry still has not fully recovered from the recent financial meltdown.

Currently, the only financing available is through the SBA, which is a good vehicle for single-unit franchisees, but not perfectly suited for multi-unit/multi-brand owners.

However, we have used the SBA for acquisitions of real estate from landlords. For new store development, we have had to be more creative with equipment leasing packages and vendor loans. We have also placed more of an importance on seller financing for the acquisition of existing units. Overall, securing financing to grow and expand our business has been extremely challenging.”

WEAVER: “I think in today’s world all three issues are of great concern. Each issue can be different depending on the amount of time you have been in the business or depending on the size of your company. Health care reform is the scariest issue when you have a bigger organization. No one knows or understands the true impact it will have. I like to call it the great unknown, and not in a good way. Everyone can agree that something needs to be done, but who can afford to sacrifice another 20 percent to 30 percent of our bottom line?

Franchise sales can be challenging in today’s environment because so many people have money sitting on the sidelines because of the uncertainty of the economy and the upcoming results of the presidential election. The current contacts you visit with are more hesitant to make a financial decision.

When I first started out in business, it was a straight line forward on the commitment and building multiple locations. Unfortunately, no one knows the future. I personally try to stay optimistic and make the best decision I can daily. On the financing/capital front, many of our brothers and sisters in the franchising world did all of their deals with the national banks. I personally always try to do as much business as possible with the local banks. That way, you deal directly with the decision maker and they grow comfortable with the way you conduct business: a true relationship. I think this is the greatest issue for the next wave of new franchisees.”

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