Where the Funds Are

A Loan at Last

Greg Brophy's business idea was so surefire, he couldn't contain himself. Sure, it would cost $125,000 to get started. But with clients lined up and projected sales in the millions, he saw no roadblocks to getting a loan. Until he reached the bank. "They gave me a firm 'no,'" he laments. Being the eager entrepreneurial sort, he looked to other sources.

Two months later, Brophy asked for an expansion loan. "Are you insane?" the bank manager asked. "Wait at least six months, build equity and then we'll talk additional funding." Brophy didn't have time to wait. At 26, he was impelled by the immediate success of his brainstorm: Shred-It, a mobile shredding service for businesses.

"I needed trucks, equipment and staff to service our growth," he says. "I borrowed $17,000 from my family, maxed out two credit cards and leased a second truck." While the bank agreed to a $15,000 line of credit, they weren't as accommodating six months later when Brophy asked for more money. "No," said bank officials, "and if you order another truck, we'll call your loan." Rejected, he left the bank and immediately ordered another truck.

So the bank called his loan. Brophy had to repay everything within 60 days. "I showed four other banks my financial statements, sales growth and projections," he says. "One gave me more money than I asked for."

With financing challenges behind him, Brophy went on to build Shred-It America Inc. into a network of more than 70 company-owned and franchised offices in nine countries, with system-wide revenues of $97 million in 1998.

If you're seeking a loan, Brophy suggests you prepare a thorough business plan and show fervent belief in your concept. "They're evaluating your commitment. Believe in yourself, and you can convince a bank to believe in you."

In the Bank

Because most franchise systems have proven track records, would-be franchisees usually have less difficulty securing start-up financing. Such sources include leasing companies, loan brokers and banks.

Before applying for a loan, however, ask the franchisor for financial support, advises Howard Bassuk, president of the Franchise Network in San Diego. The veteran franchise broker says franchisors have a vested interest in providing beneficial buyers' terms.

Case in point: Carpet-cleaning franchise Chem-Dryrequires franchisees to pay one-third of total start-up costs; the company carries the balance ($12,700) interest free for five years. Keith Gerson of Logan, Utah-based Harris Research Inc., which franchises Chem-Dry, says franchisees don't have to begin making payments until they've been in business four months. Gerson notes most Chem Dry franchisees raise their one-third ($6,350) from savings, family or friends; an SBA loan; or by using their credit cards.

Paul DeCeglie is currently working on his second book about high-finances. The former staff reporter for Journal of Commerce and American Banker can be reached at MrWritePDC@aol.com

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