Visiting a loan officer? Be prepared - Franchising: Special Guide

Nation's Business, Oct, 1993 by Paul DeCeglie

If you are frustrated by your banker's attitude toward your small-business loan application, you are not alone. Bankers surveyed by Nation's Business voiced similar concerns about working with small-business loan applicants.

"We find it significant that so many loan applicants disregard the perspective of banks," says Dennis Jones, president and CEO of Hinsdale Bank & Trust Co., in Hinsdale, Ill. "It's a common failure, particularly among prospective franchisees."

Lending officers say that the most common irritant is poor preparation. "Most just walk in, throw a franchise package in front of you, and say, What do you think?' They expect us to do the work," says Philip S. Inglee, president and CEO of Liberty National Bank, in Huntington Beach, Calif.

Bankers suggest that you do your homework. Loan officers want evidence that you have investigated the franchisor, researched the market, analyzed your personal financial condition, evaluated your ability to operate the business, and determined how you will succeed.

Says Inglee: "Come to us prepared. Draw up a personal financial statement, gather all available information on the franchise operation and its history, put together a business plan describing the business, your customers, and how long it will take to break even."

J. Scott Wilfong, senior vice president of First National Bank of Maryland, in Baltimore, says: "When you come in with your plan, be ready to defend its details. We want to know that you've done the homework and that the information is based on your findings, not the franchisor's. We'll ask you to support your data and justify your conclusions. We'll grill you."

Be honest with your loan officer. "No pie in the sky," says Robin Wantland, senior vice president of Bank One Texas NA, in Dallas. "You are trying to build a relationship, and that should revolve around trust."

Wantland says you should talk to your banker about how you will establish your business, what niche you will fill, and the existing and potential competition. "I would also like to hear about your background, especially any experience or skills that might help convince us this is a good risk for the bank," he says.

Paul Brawner, senior vice president of Huntington National Bank, in Columbus, Ohio, says bankers "just don't hear informed discussions about the bank's relevant risks and how they've been mitigated by an applicant's research, experience, financial resources, or selection of franchisor."

He says it would be "quite impressive if you came in and laid out your deal, your financial needs, and the perceived risks, then demonstrated why the bank should participate and feel secure in its participation."

Bankers say that you can go a long way toward impressing them by demonstrating an understanding of the importance of financing and the ability to repay the loan. "Research various financing methods such as Small Business Administration loans, state-sponsored programs, and banking relationships established by the franchisor," Inglee urges. "Then discuss such alternatives with your banker. We don't generally get that level of sophistication."

Jones, the Hinsdale Bank & Trust CEO, says he is impressed with substance. "Good small-business bankers put most of their reliance on the potential franchisee and secondary reliance on the nature of the franchise and the longevity of the franchisor," he says. "I want to be sure that the operation has some depth, has marketing capability, and can provide the franchisee with adequate expertise, service, and support. If you expect to get the loan, you'll make me part of understanding the franchisor very early in the game."

Before sealing a deal, Jones wants to be assured that the business makes sense. "Focus on the strengths of the franchisor which will support your eventual success," he says. "Tell me what your business is about, describe your markets, your competition, your background, your potential. We'll talk about the loan later."

For help with preparing a business plan, call (202) 663-5111 to obtain a copy of Steps to Small Business Financing, published by the American Bankers Association. The cost is $5.

Or see "How To Write A Business Plan,"in the February issue of Nation's Business. For a copy of the article, send a written request for reprint No. 8933 and a check for $1.99 to Nation's Business, Reprint Manager, 1615 H Street, N.W., Washington, D.C., 20062-2000, or call 1-800-692-4000.

Lending Sources

The following partial list of lending institutions that offer franchise financing is taken from Franchise Opportunities Guide, which is issued by the International Franchise Association. The guide is available for $15 plus shipping costs by calling 1-800-543-1038.

Allied Lending Corp.
1666 K Street, N.W.
Suite 901
Washington, D.C. 20006
(202) 3314112

AT&T Commercial Finance Corp.
5613 DTC Parkway
Suite 450
Englewood, Colo. 80111
(303) 741-4144

Bank of Commerce
1060 Eighth Ave.
Suite 207
San Diego, Calif. 92101
(619) 232-2266

Bank One--Columbus
100 E. Broad St.
Columbus, Ohio 43271
(614) 248-5081


Bay Bank & Trust Co.
509 Harrison
Panama City, Fla. 32401
(904) 769-3333

Business Loan Center, Inc.
919 Third Ave. - 17th Floor
New York, N.Y. 10022
(212) 751-5626

Capital Funding Services
P.O. Box 424
Waco, Texas 76703
(817) 753-3114

CAPTEC Financial Group, Inc.
315 Eisenhower Parkway - Suite 315
Ann Arbor, Mich. 48108
(313) 994-5505

Comercia Bank
211 W. Fort St.
Detroit, Mich. 48275
(313) 222-3740

Commercial Bank of San Francisco
33 Pine St.
San Francisco, Calif. 94109
(415) 627-0303

Kanaly Trust Co.
4550 Post Oak Place - Suite 139
Houston, Texas 77027
(713) 626-9483

The Money Store Investment Corp.
3301 "C" St.- Suite 105C
Sacramento, Calif. 95816
1-800-877-1722

SANWA Business Credit Corp.
1 S. Wacker Drive - Suite 3900
Chicago, Ill. 60606
1-800-331-5247

South Shore Bank of Chicago
7054 South Jeffrey Blvd.
Chicago, Ill. 60649
(312) 753-5671

Stephens Franchise Finance
1400 Worthen Bank Building
Little Rock, Ark. 72201
1-800-234-2271

United American Bank
P.O. Box 1959
Memphis, Tenn. 38101
(901) 766-2749

United Bank of Michigan
2620 Horizon Drive, S.E.
Grand Rapids, Mich. 49546
(616) 957-3941

Zions First National Bank
One Main St., 259-K2
Salt Lake City, Utah 84111
(801) 524-4870