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Got Cash?

If not, then you ought to know what lenders are looking for.
June 1, 2000
URL: http://www.entrepreneur.com/article/28406

We recently chatted with John Teat, national franchise lending director at Bank United, in Irving, Texas, to get the inside track on franchise lending. Bank United has begun lending to 35 different franchises in the last four months alone, so if you want to wow those lenders at your next meeting, listen up.

Nichole L. Torres: What do you look for in someone seeking a franchise loan?

John Teat: It actually depends on his or her industry. We prefer to have someone with some industry experience. If they don't have the experience, we're looking for strong franchise support. That's key for us. Also, from a purely financial side, if people want to acquire a quick-serve restaurant, they have to come up with the capital. We want to take a look at their financial statements to make sure they're not liquidating their complete cash position, that they do have something to fall back on.

Torres: How can loan applicants make the whole process run smoother?

Teat: By doing their homework about the franchise they're interested in. They should know everything about that franchise concept, because, when they approach us, what they're doing is trying to convince us to be a business partner.

Torres: What's the most important quality in a borrower?

Teat: To be considered for a loan, the pro-spective franchisee needs to be prepared to commit. [Franchisees] have to understand they no longer have paid vacations; and they have to face challenges with employees. I sit down with them and make sure they understand the volume and the value of that commitment.

I'm their business partner. I'm providing the capital and I have a certain consideration to my stockholders and their money. That's the most important thing: a commitment to making the business succeed.


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