Before beginning any money hunt, pro-spective franchisees should seek approval from their chosen franchise systems. Once an application is accepted, the franchisor usually provides an abundance of information, the most important of which is contained in the UFOC. (For more on the UFOC, see "Presidential Secrets") The information in the UFOC and other materials will help you determine your overall cash requirements and immediate borrowing needs.
If your franchisor is small or new, be prepared to do more legwork, as Tom Stringer did when he sought financing for his Computer Doctor franchise. "It's a small franchise. It was even smaller in the fall of 1999 when I started looking into it," Stringer relates. "They don't have the resources to provide guidance and fill-in-the-blanks forms. I had to do a lot of work that applicants with other franchises [are often spared]."
Lacking business experience, the chemical engineer had no idea what to do or where to begin. While adjusting to married life in his wife's native Indianapolis, he paid Computer Doctor $20,000, launched a location search, worked on a business plan and completed the first week of training. "They did refer me to some banks, but nothing came of it," says Stringer. "I had no idea where or how to pursue financing."
Realizing he was "in the dark," Stringer sought enlightenment through the Business Resource Store in Carmel, Indiana. The entrepreneurial counseling firm "not only helped me analyze what I was doing, what my goals were, how I would do business and with whom," he explains, "[but] they also coached me on operating and marketing the business, helped me develop a high-level business plan, estimated my financial needs and connected me with [CIT Small Business Lending]." The firm also saw the loan through to conclusion. "They had incentive: Their fee [3 percent of the loan amount] was based on my successfully getting financing," says Stringer. CIT provided a $115,000 SBA-backed loan at 2.5 percent over prime. "I have to pay them $2,000 a month, but knowing it will be repaid in seven years makes it easier to live with."