I’ve covered a lot of details on how to obtain the money to open a restaurant as part of the restaurant business plan package and some of the things I talk about there are brought up again here. These are points that are simple and important but often overlooked by people doing it for the first time and not familiar with the fundraising for business landscape.
All three points can come down to this: not all banks are created equal. Some of them, often the biggest ones, are basically playing by a standardized rule book where you either fit in their mold or you don’t. No amount of common sense or logic is going to overcome their fill in the blank one size fits all mentality. There are exceptions and sometimes you will find a smart and understanding loan officer working at a big bank and bucking the system but that is definitely the exception.
More often you will have better luck at smaller banks where they don’t have a big rule book and they actually listen to and think about what you are telling them regarding your business. There they have the flexibility to make decisions that are a little outside the lines. They also may be more likely to be familiar with local conditions and able to see the same up and coming opportunity you see that doesn’t fit into a paper formula.
The bottom line is not all banks are the same and just because one said no doesn’t mean they all will. You should listen to the feedback and evaluate it objectively but at the same time if you know your appeal makes sense and the bank is being shortsighted or foolish than you just have to move on to the next bank. Persistence is always the winner in these types of battles.
Last week, the International Franchise Association hosted the Small Business Lending Summit, an event designed to help IFA members access credit and spur business growth. Franchisors, franchisees and bankers were all in attendance with a single goal in mind: to work together to accelerate job growth.
According to National Restaurant Association COO David Gilbert, small business lending is a big hurdle for restaurants, with 44% of quickservice operators reporting more difficulty securing funding in 2010 than in 2009. However, growth in franchising is closely tied to growth in the overall economy. The Franchise Business Economic Outlook: 2011 shows that franchising growth as a whole is growing at just below 5% for 2011, which is slightly faster than the economy at large.
So how does a business overcome the key hurdle, a lack of access to credit? One of the Small Business Lending Summit’s panels, “A Lender’s View on the Credit Crunch,” examined that very issue. The panel, which included executives from the National Association of Government Guaranteed Lenders, Regions Financial Corp. and Huntington National Bank, discussed what franchisees and franchisors can do to help secure credit with banks.
- Choose your bank wisely. Select a bank that has expertise in small business or franchise lending. Ask upfront if a bank is interested in franchise lending. Make sure that the bank adequately covers your footprint, whether it’s local, regional or larger.
- Educate your bank. Present the bank with data and history about your franchise or brand. Banks want to mitigate their risk. The more information and documentation you have to prove the viability of your business, the less risky it appears to the bank. This isn’t just advice for franchisees. Franchise companies can do their part by educating banks about their brands by offering information including sales plans, marketing support for franchisees, HR support and product development.
- Develop a relationship with your bank. Bring your whole relationship to the bank where you get credit. The bank will give you a better rate if you also sign up for services such as deposits, cash management, etc.
The above suggestions won’t necessarily guarantee that you’ll receive credit at the bank of your choice; however, they will go a long way toward helping resolve the disconnect between bankers and franchisees.
Quoted Article Source Link: Smartblog Restaurants
