If You're in Franchising and Need a New Bank, Ask These Questions Now more than ever, franchisors and franchisees alike need to work with a bank they can trust. Here's how to get the most of your financial partner.

By Frances Dodds

entrepreneur daily

This story appears in the October 2020 issue of Entrepreneur. Subscribe »

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1. Start Out with the Smaller Banks

From Geoff Seiber, CEO, FranFund

You tend to get your first loan wherever you can. A lot of the time, that's a bank that lends nationally, especially with franchises. But the real bank you want to use for your operations from that point forward is an entirely different bank. The big banks have their place, but at a community bank or a smaller regional bank, you may actually get to know the president or members of the board. That bank may be the right size for you, especially if they're willing to lend you money for additional units. After you've been with them a year, that's a fair question. Go in and say, 'This is my plan. I'm going to need money here and here. Is that something I could come to you for?' If they say yes, you've hit the home run. If they say no, well, you might want to look for another bank. But you can't judge them until you give them enough data. You need to know your banker and leverage that professional relationship, just like you would your accountant or your lawyer. Don't let the first time they see you be when you're going in with a life-or-death need. What happened with the PPP is just one instance. A good banker can make you a lot of money, and not just on the finance side of it. They can make valuable introductions. But the key is building the relationship."

Related: 5 Signs It's Time to Switch Your Business Bank

2. Banking Benefits

From Glenn Read, franchisee, Allegra Marketing Print Mail

Glenn Read opened an Allegra unit in Schenectady, N.Y., in 2017. By 2019, he struggled with cash flow. He applied for a $100K loan from Pursuit, a community-focused lender, and refinanced his debt. Since then, Pursuit has…

1. Financed additional units.

"Almost immediately after getting the first loan, I had an opportunity to purchase a competitor," Read says. "I contacted the folks at Pursuit and we put together an SBA 7(a) loan. There were a lot of challenges to overcome. I had less-than-perfect credit and limited cash reserves, but they held my hand to make sure I got to closing."

2. Reached out in times of crisis.

When the pandemic hit, Pursuit was proactive. "They contacted me about deferments and some of the benefits the SBA was offering, including the PPP program," Read says.

3. Provided capital to build savings.

"I'm working on purchasing the building that houses my business, which will save me thousands in lease payments," Read says. "I'm doing this with a loan from Pursuit and a local bank, so our relationship keeps going strong."

Related: Entrepreneur buys a bank building that denied him credit for his business

3. Unexpected Success

From Aaron Suriff, national franchise director, The Whimsy Cookie Company

What he expected: This 14-year-old Tennessee-based franchise had good relationships with Wells Fargo and Bank of America…until COVID-19. "When we started applying for PPP, it was way too hard to get through to anybody," Suriff says. So they applied through Independent Bank in Memphis, hoping for better communication.

What he got: "We got our PPP money faster than just about everybody," Suriff says. "We didn't hear back from Bank of America for nearly a month. But at Independent we have somebody I can call anytime, and when she says yes or no, you know it's correct. Because they're a smaller bank, they want to retain our money. So as the pandemic starts to end, we will be moving more of our accounts over there."

Frances Dodds

Entrepreneur Staff

Deputy Editor of Entrepreneur

Frances Dodds is Entrepreneur magazine's deputy editor. Before that she was features director for Entrepreneur.com, and a senior editor at DuJour magazine. She's written for Longreads, New York Magazine, Architectural Digest, Us Weekly, Coveteur and more.

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