Franchise Alliance President Dan Prechtel speaks of
credit markets:
Consultant
Question: How is the current economic downturn
and tightening of credit affecting
franchise financing?
Dan Prechtel Response: Like the rest
of the marketplace, we are not immune to the
vagaries of the economy. However, our business
has not suffered nearly as much as you might expect.
On the negative side, home equity as a
means of financing a new franchise or even a down
payment on a franchise has virtually disappeared.
During the real estate run-up in values, home equity
was a terrific resource for funding a business.
That source is lost to us now.
On the positive side,
franchisers are being far more aggressive about
providing internal financing, particularly for soft
costs. This willingness to offer "owner
financing" has opened as many new doors as the loss
of home equity closed.
Another positive is
the government pressure on the SBA to get money into
circulation, especially for small business.
Small business is universally recognized as the
number one engine for creating new jobs. As a
consequence, a credit score of 650 or higher with a
pre-approved business model equals an answer in
three days! If the borrower has up to
twenty percent down payment and the business will
support his family, the answer is positive.
Finally comes the
stabilization of the stock markets. With the
markets leveling off and the realization that
recovery will be measured in years, investors are
using our strategic partners at Benetrends and
Guidant Financial to tap into retirement funds in
record numbers. The ability to invest in
oneself with no tax penalty is a powerful lure!
The final answer?
Mixed. But as always in our business, the
Franchise Alliance consultant has the opportunity to
adapt his model to the real world on a daily basis
and continue to help others find their dreams!
In good times and bad Americans want to own their
own business....we can't help ourselves, it's in our
DNA!
My best regards for
another great month! Dan Prechtel
