Obama Asks for SBA Loan Expansion, Franchisees Agree
WASHINGTON - President Barack Obama announced plans Wednesday afternoon to shift some of Wall Street’s bailout funds over to community banks in order to spur lending to small businesses, which has slowed to a trickle. With SBA administrator Karen Mills and Secretary of the Treasury Tim Geithner flanking him, President Obama made several announcements to boost small business.
The President’s speech took place at Metropolitan Archives, a family-operated records storage company in Landover, Maryland.
President Barack Obama, who as a high school student served ice cream in a Honolulu Baskin Robbins franchise, described how small business owners and their tireless work ethic form the backbone of the American economy. “Hewlett-Packard began in a garage. Google began as a research project. McDonald's started with just one restaurant,” he said.
The President went on to say that although small business creates 65 percent of all new jobs, small businesses have been some of the hardest hit by the recession. “From the middle of 2007 through the end of 2008, small businesses lost 2.4 million jobs,” said the President. “And because banks shrunk from lending in the midst of the financial crisis, it's been difficult for entrepreneurs to take out the loans they need to start a business. For those who do own a small business, it's been difficult to finance inventories and make payroll, or expand if things are going well.”
The White House is requesting that Congress increase Small Business Administration 7(a) and 504 loans, used by small business owners to typically buy equipment, land and buildings, from the current cap of $2 million to $5 million.
“These larger loans will help more small business owners and franchisees grow,” Obama declared.
The Administration plans to bring together regulators, congressional leaders, lenders and small businesses to discuss what steps are necessary to get the small business credit pump flowing again.
“I'm confident that the steps we announced today will do that for small business owners across the country, men and women we hear from every day,” said the president.
Franchisees Want Help
International Franchise Association CEO Matthew Shay thinks the loan cap increase is a good idea. During the year, the IFA has lobbied Congress, the Treasury, the Small Business Administration and the Federal Reserve to help change the lack of capital access for franchise chains. Those efforts seem to be bearing fruit.
“Administration officials noted that the desire to increase the size of the SBA loans was driven in part by meetings with large franchise corporations like Dunkin' Donuts,” reports BusinessWeek.
“There are over 400 different franchise brands in the United States that have an average initial investment requirement of $750,000 to $2 million per unit,” observes Shay. “These franchised small businesses reach the SBA’s current loan limit of $2 million by the time they want to build the second or third store. By increasing the loan limit to $5 million, at an annual growth rate of 5 percent, these businesses could create 450,000 to 650,000 new direct and indirect jobs within the next 12 to 18 months.”
The International Franchise Association, representing the needs of some 1,100 franchisors, arranged for franchisor members to invite their franchisees to attend the meeting. Franchisee Vinay Patel of JAI hotels, Meineke dealer Chris Schmitz, and other franchisees were in attendance, many are also members of independent franchisee associations.
Franchisee Chris Schmitz, also president of the Meineke Dealers Association, an independent franchisee association, said, “Ken Walker [CEO of franchisor Meineke] asked me to represent franchisees on behalf of the IFA.” Ken Walker, CEO of Meineke Car Care holding company Driven Brands, Inc., is scheduled to be the next chairman of the International Franchise Association.
Schmitz says that President Obama's message was good news for all franchisees. "Including those looking for capital to make ends meet, expand their current operations, acquire additional units, or even those looking to sell or divest," he elaborates. He adds, "Increasing the availability and flow of credit can be an integral part of revitalizing a down economy and stemming the tide of rising unemployment, provided the Congress follows through with the initiative.”
Dunkin’ Donuts franchisee Andy Cabral was also in attendance, and was pointed out in the President's speech.
“Andy started his business on an SBA loan and now runs 10 stores across Maryland and Virginia that employ 130 people,” President Obama states. “And Andy has already seen one loan fall through the cracks because of the financial crisis and he's hit the cap on his SBA loans. But the measure we're announcing today will help Andy and other franchisees pursue their plans to expand and create more jobs.”
President Obama concluded the meeting, saying, “I know that times are tough and I can only imagine what many of you are going through, in terms of keeping things going in the midst of a very tough economic climate, but I guarantee you this: This administration is going to stand behind small businesses. You are our highest priority because we are confident that when you are succeeding, America succeeds.”
--
Related Reading:
- The full text of the speech is here.
- IFAs Nearly Year Long Effort to Ease Credit
- Franchise topic:
- Enter Your Own Tag:
MSNBC business reporter speaks with experts from New York City's small business services and Street.com about Pres. Obama's proposal to increase SBA 7a and 504 loans to help small businesses and franchises grow.
Sometimes it is the mundane scenes that make cool photos.
Here are three signs posted backstage to help direct participants during a Small Business Administration event at the Metropolitan Archives in Hyattsville, Md., in which President Obama spoke on Oct. 21, 2009.
(Official White House Photo by Pete Souza / Public domain)
Totally funny.
The franchises that are into selling franchises and hurting zees are a disgrace to our country. In fact rogue franchising gives business a bad name. Does Obama have any clue what is happening in the world of franchising? I wonder if he reads franchise horror stories on the internet. Helping zees in a bad system only makes the zor richer while the zee works for nothing and has no benefits. Not to mention the zor uses the zees money. What a win win situation for a bad zor. Not all zors are bad. A good percentage is bad. Otherwise there would be no horror stories.
being supported anywhere I can see. I see spin.
Small Business’s fragmented inclination to sit in the back stalls gets it what it deserves. Franchisees sitting in the back stalls get a lot less.
Small business and even franchising is too big a contribution to any economy to cultivate organization. If it were organized it would be tougher than NRA. But we are talking a very different effort and a different mentality. We are more like the Girl Guides without the effort.
We should have a Jamboree.
The more things change; the more they stay the same.
This comment is off topic and has been moved here.
As a Zee, I am just AMAZED at the emphasis on SBA on this forum.
We are multi-unit, we have been in it 15 years, we have never used SBA nor a loan broker or loan consultant. I don't know anyone in our system who does, though I expect that out of thousands of Zees there must be someone somewhere.
We make our own projections and run our own numbers, we don't rely on Zor figures.
P.S. - We also don't use those friggin' 'advance me' companies that tell you they aren't giving you a loan, they are giving you a cash advance on your credit card sales. Even though they cold-call just about every week. Fook 'em and stop bothering me!
I am also a franchisee, have been multi-unit, and have never used an SBA loan. That doesn't mean that increasing the availability and size of such loans is not a good thing for me or my franchise system, however. In order to grow the number of units and the value of the brand, we need potential investors and existing franchisees with access to capital. Having recently sold two units, I can tell you that the lack of credit available to potential buyers hamstrung the effort and resulted in a lesser return on my investment. The flow of credit, whether through the SBA or other channels, is critical to revitalizing the economy and stimulating job growth.
Senator Warner has recently put forward a proposal to reallocate unused TARP funds combine them with resources of community and regional banks to create a $50 billion small business loan fund. You can read a copy of Senator Warner's request to the President HERE. Hopefully these are merely the first steps to unclogging the flow of captial back into the economy through small business.
opportunities, what!
Senator Warner represents a laxative impact upon simulus - man if that is not a bowel reference, nothing is.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
franchise associations seperate them selves from the IFA, they will have to put up with what ever lobbying efforts are made on behalf of FRANCHISING. I can understand that there are many issues that the zors and zees and united in ie; card check, but there are many issues they disagree on.
The Independent Zee Associations can unite lobbying power on common ground issues, yet stand on their own on issues that protect them.
However, Congress continues to believe that the zee and the zor are united on all fronts, because the zee allows the IFA to represent them. Not everyone understands that this is a CONFLICT OF INTEREST.
I know of none.
Banks can reject a loan application for $5 million just as easily as they reject a loan application for $2 million. While this increase may help multi-unit owners and franchises with an initial investment in excess of $2 million, it does not solve the primary issue - that banks are not lending money to small business owners, franchisees, or prospective franchisees. Obama is once again disingenuous when he states: "This administration is going to stand behind small businesses. You are our highest priority because we are confident that when you are succeeding, America succeeds." If small businesses were the administration's highest priority, then why was such a small percentage of the stimulus money allocated to small businesses? The government bailed out the banks, AIG, Chrysler, GM, etc. Did they bail out any small businesses? Did the forced closing of so many auto dealers help small businesses? Nine month's into office and this is the first time Obama has said or done one thing for small business owners. I say this to everyone I can: "the economy will not pick up until banks start lending money to small businesses". Increasing the SBA loan guaranty is a small first step.
interpretation of the current situation.
Stimulus money has been approved but is not being spent without some insight into its present tense need. If your porject - whatever it is- is not "shovel ready", your aren't getting funded. Only about $ 60 billion of the stimulus money has been disbursed.
TARP money is another program that was used to try to prevent total economic collapse of the US financial system. That has to be regarded differently than stimulus money. As we can see, the wholesale dumping of money into apparent emergencies does not carry with it sufficient controls to prevent major abuses. Moreover, dumping money on General Motors has not produced much of anything. It's the same people trying to sell models that were in the pipeline two years ago, but claiming that it is all new - a complete lie.
Small business financing needs to have some serious vetting before funding is thrown into a huge no rules bucket. At best it will take several months before anything is meaningfully available.
This is the art of the possible, not a magic show. So I think the administration needs not to be called a failure because SBA loan stimulus money is not there tomorrow morning.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
"Small business financing needs to have some serious vetting before funding is thrown into a huge no rules bucket. At best it will take several months before anything is meaningfully available."
Richard, you are absolutely correct about throwing money into a huge no rules bucket. Unfortunately, the SBA's hands are tied due to the Franchisor's Trade Commission, er, I'm sorry, the Federal Trade Commission. As long as the real net revenues are hidden, "funny" numbers can be used to obtain the loan. Which is why franchisors are chomping at the bit to get this money flowing. It will take more than several months for this to be corrected. It will take franchisees from all systems to finally speak up. Until then, scam franchisors will have the same access to SBA funds as legitimate franchisors.
do not get expert pre investment due diligence assistance. Vetting a franchise investment is more - much more - than sorting out Item 19 and other earnings claims and eliminating fictitious accounting in support of loan applications.
Apparently, unassisted franchise investors are unable - according to you - to recognize that if you have to invent fantasy numbers to get the loan, you are primarily lying to yourself. Posit the scenario - I have no idea what the reasonable estimates might be, so I will use whatever phony numbers are required to qualify for the loan - and then I expect to be able to run a business that will corroboreate those projections sufficiently to pay off the loan and make a living too.
How bloody stupid do you have to be to see that you are only - in the end - cheating yourself. If franchise investors are that stupid, I suppose it is ridiculous to expect them to be smart enough to purchase real due diligence assistance, right?
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
As stated previously, I had a franchise lawyer and an accountant. The numbers provided by the loan consultant fell in lockstep with what we were told by the franchisor so nothing seemed amiss. No franchisee would submit false numbers to get a loan knowing that the real numbers show that most franchisees show a major loss in their first year (discovered a year and a half later when the franchisor published the numbers). Who the hell would roll the dice on their home like that?
The real numbers were also missed by a well known franchise analysis company that named my franchise a top 25 franchise investment (it is no longer). The real numbers were also missed by another organization naming the franchisor a top 100 franchise.
None of them were able to figure it out so don't give me your bullsh--. I didn't put down any numbers. We were all sent by the franchisor ( a company around for years, on the SBA fast track approval list, and no public negative comments - they make sure of it by using some of your legal friends) to the same loan consultant and told they, the loan consultant, had all the numbers. No one caught it - and they still haven't. They are still doing the same thing. And you, of all people, damn well know it.
lawyer who provides due diligence on the deal as well as the FDD. If your confine your investigation to what the FDD tells you and what the FDD tells you to look for you will always come up with the wrong answer. A crooked franchisor will not tell you how to find out he is lying. You need a lawyer who knows how to vet those issues.
You have to do what I tell everyone to do - Ask if the lawyer does frachise pre investment due diligence as a major part of his practice. If he says Yes, then ask him if he does deal due diligence as well as legal due diligence. If he says No - move on and find a real pre investment franchise lawyer. Your cousin Morris could have read you the damn FDD and told you almost as much as your inadequate lawyer.
It's too late for you, but not too late to use your pathetic experience as a teraching tool for people who are now thinking of investing in a franchise. You are one of the FranWad poster children.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
I have commented on BMM numerous times that franchisees should use the attorneys that post on this site. Many of us are now aware of the real problems associated with franchising and the difference between a real franchise attorney and those who do it part time. However, what is pathetic is your need for braggadocio. What is a true teaching tool is to inform people how many of us got roped into these scams.
Franchisees within each franchise system who used SBA loans need to get together, pull out their business plans and projections and compare notes. Where did they get the numbers from? Were they led to a loan consultant? What were their real first year gross and net numbers? Is there a pattern? The SBA needs to hear from more franchisees from systems that are manipulating the loan application. If you want to stop the fraudulent franchise system from bankrupting more families this is where it starts. This is their damn gravy train.
give a break you crybaby. You were lazy, foolish and sloppy. You are to blame for your failure.
Lawyers, FTC, Franchisors, franchisee shills are all in it together to defraud Franwads like Oldsword. We have been found out oh no! Thank God Obama doesn't know about it.
It is unfortunate that folks like Oldsword look to BMM for redemption for their foolishness.
I was waiting for this comment. Do I call you Tyrone, Joe, which one? Or is there a new individual out there using the same techniques. Call someone names, ignore the facts and then, yes, the killer, tell them they won't find redemption here. Heard it. The best part is that each time you post I get to educate many others with how the scam works. As long as I can get new franchisees to see that the manipulation and scamming begins right at the beginning with the SBA loan projections you can call me what you like.
Marketing, franchisor assistance, none of it matters. The franchisee from most franchise systems never truly qualified for the SBA loan. The franchisee was never expected to make money. The franchisor knows full well that their franchisees' gross and net revenues are nowhere near the numbers needed to qualify for the loan.
Are you guys all sure this is not that nutty Carol Eblen hag? Same MO. Maybe Carol teaches classes in trolling? Because every time I read this "I am blameless" and conspiracy stuff it sounds like Carol.
Jimbo Franchise Overlord.
Heck maybe I'm your former franchisor?
"an unrealistic business plan"
"your numbers are false"
"made a bad franchise investment"
"You were lazy, foolish and sloppy"
"Heck maybe I'm your former franchisor"
Interesting. All quotes from you in your posts from this thread. I clearly stated the franchisor has sent multiple dozens, if not hundreds of franchisors over the last 3 years to the same loan consultant that provided the same false information to all of us. Afterwards you clearly state that it was a "bad franchise investment" and that I was "sloppy" in my due diligence to determine that it was a bad franchise investment but then you then say that "maybe I'm your former franchisor". Quite a statement. You clearly admit to being part of a franchise scam that gives out false information. Whether it is my franchise system or not, you seem to be very comfortable admitting that a franchise sale involving false numbers and being a bad franchise investment, so much so that I was too "lazy" to figure it out, reminds you of your franchise system.
I'm sure the readership here would love to know the name of the franchise system you are involved with to help them with their lawsuits. Obviously, you are great debater. No facts and admits to being part of a scam. As I mentioned earlier, getting out of your chair and standing up would make it a hell of alot easier.
You obviously don't understand personal responsibility and my use of sarcasm to point out how you played a role in your failure. Your repeated claims of innocence and victim hood ring hollow...you are a Franwad exemplar.
Great response. Ignore or disown your own statements, forget the facts and attack the messenger by name calling. As I said, great debator, - don't forget about standing up.
What role did you play?
What instructive advice do you have for potential franchisees?
In many bad systems the zees have alot of help to fail. The word is called gouging. Don't you read the horror stories of those who were taken?
You should be demanding that Rusty Oldsword "get real" about how and why he failed instead of blaming everyone but himself.
There are a many reasons why people get hurt in franchising. You honestly believe all zors are honest? I know there are dishonest zees also but there is too much evidence that proves rogue zors exist. Too many stories out there that tell everyone many are set up to fail. It is called turn and churn. Using the first generation's money to set up the zor's empires.
If more people had the guts to tell their stories more will be cautious and not get hurt.
Oldsword's stories about zors giving false earning claims to the banks to get zees who never should of been qualified is consistant.
If you want a real estate appraisal, your real estate agent will get a high appraisal from a friendly appraiser to whom he sends a lot of business. If you do it yourself, the appraiser will first ask you if you want an insurance appraisal or a tax appraisal - different appraisals - high for insurance purposes and low for tax purposes.
If you want jewels or fine art appraised, you get the same choice.
Pro formas in business plans are like appraisals in that they are opinions about asset values - only expressed in different ways.
So don't act like this is exclusive to franchising - and when the government is guaranteeing it, the banks could care less what you say as long as you say the "right" words/numbers.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
It doesn't make it right.
wrong that you see.
When you have been victimized, what happened to you always seems wrong in some absolute sense. But in reality there is no absolute right and wrong. There are degrees of deviation from some mean standard of conduct. In every situation there are usually several mean deviations from trend lines within which what happens is economically "right" because it represents market normal conduct. Wrong is when conduct is beyond that number of mean deviations, and how wrong it is is not dependent upon the nuymber of mean deviations, but on the consequences inflicted by the market. You can be way off the line and still do well and be highly thought of because creativity is always way beyond normal conduct. Since creativity is usually very positive, the market will tend to reward and recognize way out of line conduct according to the result it produces.
No one conforms to biblical moral right. That is an absolute standard that the patriarchs and the apostles failed to meet - consider Judas Iscariot, for example, and Peter's betrayal. Hurt people want to be the judges of the people who hurt them. Their inability to see other than in absolute terms is why they are never allowed to be the judges in the situations in which they were injured. Family members of people shot without reason are not allowed to make gun laws, for example.
So, while I disagree with those who blame victims for everything that happens to them because that simply isn't always so, I only make professional judgments based upon the realities of the arena in which the conduct occurred.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
So if I’m reading this correctly; somewhere between the figures sometimes supplied for an SBA and the tax history for a network you get the ‘honest’ figures. One to the sword.
The more things change; the more they stay the same.
Barbara, anonymous guest is into Oldsword. Not SBA and not franchising. Oldsword tends to [mostly] warn people about potential SBA consequences when they are manipulated.
Oldsword continues to allow guest to draw him into a discussion on his sole experience as if he is alone in that experience. And that apparently is not the case.
Others here discuss the positive potential associated with SBA when it is not abused.
Anon guest seems to simply have a fixation on Oldsword and while he may not contribute anything of value to the thread, we should not stand in the way of his sick little sword fetish.
And I would consider the distraction to a discussion on anchovies, particularly at Blue Mau Mau, as somewhat unsavoury.
The more things change; the more they stay the same.
Thank you, Ray. Been away for a little bit and just read the various comments.
1. 20%-25% of my fellow franchisees either closed or "transferred" in 2008. (total of all franchisees is in the several hundred)2. There were more closings/transfers but some of those occurred late in the year and somehow 'slipped' into '09 numbers. The paperwork was 'somehow' delayed. Helped '08 look 'better' I guess. 3. Of those that "transferred" (I love that word) most took place in the $1 (yes, that's one dollar) to $30,000 range. 4. Start up costs for a brand new one - about $300,000. Not including additional working capital since most don't break even for a while. Total losses of many I spoke to average around $500,000 almost all within a 2 year period opening to close. (Would "Guest" like to calculate the ROI?)
As you stated, Ray I want to warn people of the scam. The real, historic, proven first year revenue numbers for most franchise systems do not meet the SBA minimum requirements. To get the loan approved, the franchisor provides to the unsuspecting franchisee, either directly or through a loan consultant, inflated projections that will meet the SBA requirements thereby guaranteeing loan approval and shackling the franchisee's home and other assets.
invest in the franchise you failed in!
Great then at least part of my job is being done right. But this is a system wide scam not just my franchisor.
Now, franchisees from other 'failing' systems (those where few generate a profit and there is significant turnover) need to do some homework. I would like to see someone, say a Quiznos franchisee, that took out a SBA loan somewhere between 2006-2009 to get their SBA business plan and projections out and do the following:
1. Look at their first year projections and look at their first year (from opening day to exactly 1 year later) tax returns to compare one against the other. 2. Contact other franchisees who got a SBA loan between those same years (as long as the franchisor requirements were the same i.e. buildout specifications, equipment etc so the numbers aren't skewed)- get as many as you can to discuss this. 3. Compare the following information: Amount of loan, Gross and net revenue projections for years 1 thru 3, how you got those numbers (or from who), and what your real first year gross and net numbers where (again from exactly the first day of opening to one year later). 4. If you can ascertain what the average brand new first year franchisee does for your franchise system that would help. (perhaps your franchisor publishes revenue numbers for each franchisee - maybe the franchisee association has numbers)
Franchisees will then see how they got roped in. Most will find a huge disparity between the projections and reality. But the inflated projection was needed to meet the SBA guidelines and get approval. All the problems start here.
has consistently warned people that they should be wary of the potential to have SBA loans based on frabricated figures that would potentially cost them the farm. When a good thing is abused the gullible are buying in because it is promoted solely as a good thing and no one tells them anything different. No one tells them to be carefull. Sound familiar?
The more things change; the more they stay the same.
Ray, "Guest" is all about infantile insults and the typical manipulation of a franchisor. He has said the same exact things to me that Tyrone and Joe said. No difference. Just like all franchisors are taught to tell franchisees that "you are the only one experiencing these problems" and that "you need to spend more money on advertising" and all the other quick quotes that franchisees hear, they are also taught the same verbiage when attacking someone's arguments: call them names, say they are seeking absolution/redemption from others to help their hurt egos - the list goes on. He is pulling the same crap.
His last comment to you was nothing but a childish rant. The best part is he thinks he is winning. I am waiting for his next retort to be either: "I know you are but what am I", "I'm rubber and you're glue. . ." or Yo' mama jokes.
You know me so well that you can predict the future, Holy Cow!
You are a failed Franwad with nothing to offer other than a fake warning to folks to avoid franchises, loan brokers and the SBA. Which is all very helpful?
he would warn folks about the franchise he bought and failed in! Rusty Oldsword is a coward and bomb thrower.
can you call him a coward when you share nothing but a stupid baseless personal attack buried in your inability to read what he has contributed. You have the hide to call him a coward and yet you haven't shared a bloody thing about your background. Who is the coward?
There is typically one reason why a franchisee will not divulge who or where they come from. Their franchisor is a dangerous ashole and they are too easy to identify. Seems you may believe you can con Oldsword into hanging himself. Why? Do you think he is one of yours or possibly one of your buddy's?
Are you capable of arguing points or only capable of pointless personal criticism. My eldest grand-daughter is going through that stage with her siblings.
The more things change; the more they stay the same.
The Rusty Oldsword has offered nothing instructive since all he has posted is vague and not useful to a potential franchisee e,g., franchises are bad and SBA loans are a scam.
You waste everyone's time. Franchises can be bad. SBA can be scammed. Good warning for your potential market. May not be helpful to you but no one really gives a damn. If you feel like the ignorant ignored then you will be right for a change.
The more things change; the more they stay the same.
don't fall over down under, ya hear!
I disagree guest,
The situation Oldsword describes with SBA loans is not specific to one franchisor.
There is a time and place for singling out individual systems for individual transgressions but it is far more important to educate readers about the possible methods that can be used to mislead potential franchisees.
if Oldsword were to only talk about one specific franchise, that would be like giving readers a fish, "dont buy franchise x"
By discussing the method by which franchisors mislead he/she is teaching readers how to catch the fish for themselves or in franchising, how to avoid being the fish that gets caught.
There is nothing instructive or actionable for a potential franchisee in what the Rusty Oldsword has posted.
Anchovies are savory!
I made a bad franchise investment, falsified my loan application and it is someone else's fault.
If this funding increase goes through, it will be great, but there will still be small business owners struggling to secure working capital. These businesses need to know there are alternatives to bank loans, SBA loans and credit cards. Companies like Business Cash Advance.com provide alternative financing in the form of a business cash advance. Money is given to a business up front in exchange for a small portion of their future credit card sales. This process enables owners to afford their day-to-day expenses while having a cash flow for unexpected events.
If and when there are more banks backing SBA loans, businesses should take advantage; however, a business cash advance should be considered due to the quick and easy process of being able to provide the necessary capital that is so difficult to obtain in today’s economy.
To learn more about this type of small business financing, visit www.businesscashadvance.com/blog.
From the Business News Week article:
"Administration officials noted that the desire to increase the size of the SBA loans was driven in part by meetings with large franchise corporations like Dunkin' Donuts. "What drives them is when they can get top-notch people that want to start four to five franchises at once," the official said. Ware says he thinks this reasoning is sound. "It is not Dunkin' Donuts that will be getting the money, it will be the owner of the franchise out there in Nebraska," he said."
Hard to believe with 350 lawsuits aimed at ejecting DD Franchisees that any business reporter could write this with a straight face.
DD wants multi-owners because it needs to replace the owners it is churning out. What better device than to replace 4 churner owners with one multi-store owner who has a vicious obey all laws clause and a cross default.
Churn baby, churn.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Thank you, Michael, I was going to point out the same thing in a later note so as not to bore the readers with too many comments (although I have probably already failed on that end). To add insult to injury, would you like to comment on the "success" DD has had in having these new franchisees open "multiple sites" all at one time? If I recall, there have been several stories here about how some of them were having to get out of their "deals".
‘From the middle of 2007 through the end of 2008, small businesses lost 2.4 million jobs’
Obama is sending more people to sharks. I know he needs to fix unemployment but nothing here to make sure that the loan is not going to a scam. I see more people coming to blue mau mau real soon.
The government knows that most of franchising is a fraud. Most people get screwed for life. This is part of a good thing but with no real oversight of dishonest franchises Obama is saying the people that get scammed don’t count for nothing. The people that steal create jobs so that is all that needs to be done with franchising. Take the money. Rip off some people. Just make some jobs.
Obama just lost me. He left out Quiznos.
What a pile of horse manure..
"The government knows that most of franchising is a fraud."
Prove it.
Don’t be playing at dumb. That is the best part of the con.
Most people everywhere will tell you it’s a con. All people know that most of franchising is a con. You should get out more. You should read some more. This SBA will help sell more cons.
Obama lost me. He should have gone one step further.
"Most people everywhere will tell you it’s a con"
So tell me how can such a large part of the US economy for such a long time be a com?
Don’t be so ridiculous. Next thing you will tell me is that politicians are straight, Wall Street is pure and Madoff was an angel. The con helps the economy that is why the con is indirectly government fed.
Every time the economy has gone bad it is not the little people that screwed it up. It is lack of oversight.
Hyperbole! Where are your facts, BO?
Your emotions have gotten the best of you and you've lost perspective.
Your perspective is clouded by $s. So what is your health report for franchising.
How many systems would you sell v how many would you buy into. How much of franchising is not a con. Tell all readers why franchising is a good investment.
franchises a "con". In fact the numerous successful franchisees defy your premise.
There are around 3000 franchise concepts to choose from and one should choose wisely, not to mention be sufficiently capitalized to fund your business venture.
I’m underfunded and really stupid and I want to sign a contract with a system but I don’t really care if it is a scam. I’m looking for someone who can guide me to the perfect contract and show me how to manipulate SBA.
SBA and franchising seem to have similarities where the concept is so brilliant it attracts those who will abuse it and those who will ignore such abuse and those who plan to make a new buck because it apparently isn’t that difficult. How much do you charge?
Anonymous guest can you help me or should I talk to your husband.
The more things change; the more they stay the same.
We are proud to announce Ray Borradale has purchased 1000 unit development rights to MyChovy Subs in Australia and New Zealand. MyChovy Subs is the only catch, fry and construct your own sandwich shop in the world.
Rusty Oldsword President/Founder of MyChovy Subs stated that after failing in franchising in the US he decided after meeting Ray Borradale on an obscure franchise blogging and foum site to build his MyChovy venture down under. Mr. Oldsword went on to say that even though Ray lacks capital and experience he liked him so much he did the deal anyway.
sarcastic humor so much that I would laugh at a good porky, no matter who said it.
Just imagine Crocodile Borradale in the Anchovy sandwich business. And I can see him doing it too, because his taste for anchovies transcends and permeates many aspects of his life.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon,
MyChovy Franchising USA LTD would love to sign you up to develop Texas and the Mexican border towns. Rusty Oldsword can arrange for you to get an pre-investment earnings projection and SBA loan.
What time should I have Rusty call you?
we don't have milkable government programs, ho will we remediate the circumstances to which we are brought by unbridled so called free market vicissitudes? We don't need to bring back Herbert Hoover to deal with present tense troubles.
If I am reading you right, you have just not yet figured out a way to get your hands on any of it. I'm working on my shot. You work on yours and let's compare notes on how we made out. I think I'll run me a special promotion on representing crooked doctors, clinics and diagnostic labs. What you gonna do?
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Believe me, I "got milk" (the SBA loan) by listening to the guidance of my franchisor sales person and loan consultant (grossly exaggerated first, second and third year projections). Then, I "Got Milked" because of listening to them.
BUT, I figured out how to get mine. I am going to develop a business and sell franchises. Apparently, it doesn't matter to the SBA or the IFA if you sell a system that is not proven and doesn't make money. Just 'guide' the franchisee to a loan consultant that is willing to play ball (that keeps the money trail at arms length), have the loan consultant use fraudulent projections that meet the SBA guidelines, collect the money from the franchisee after they get loan approval and then I am home free. If I hire the right franchisor law firm I can get an iron clad franchise agreement that absolves me of anything I say, do or write down. Then have the franchisee sign a General Release form for full protection. After that, as the franchisee starts 'going under', I can tell them "you are the only one experiencing this problem" and that "you need to spend more money on advertising". Once they get ready to fail I can then tell them "well, some people just aren't made out for franchising". Then I can go build a summer home on the ocean.
All the while, I can help people who formerly had good paying jobs to get $8.00 an hour jobs so the government can call them "Employed" for their monthly statistics. You're right, Rich - this IS a great government program!!
You seem like a bright person and I guess I don't get how the phony projections could have been made without your participation?
Don't even try to go there. I have business plans and projections of 8 other franchisees who were all "guided" to the same loan consultant and all have the same fraudulent projections. AND, smartass, after the SBA delved into this and started to pull the loan applications from banks nationwide they told me that ALL the loans from my franchise system (in two years, over 100) showed the same thing (and, preliminarily, in multiple other franchise systems). Franchisors have figured this wonderful game out and continue to this day to hide behind this charade - all the while placing the franchisee in financial peril. The best part. by the time the franchisee begins to fail several things have happened: first, enough time has transpired that they forgot about the loan and projections (and after the franchisor has beaten into them that the failure is all the franchisee's fault) so they don't realize what has happened; second, the franchisee, whose home, family and financial future is now on the line, is trying just to pull themselves out of this mess and is afraid of losing everything so they don't go back to see how this all happened.
But, franchisor apologists must be very proud of having been able to do this for so long - and I am sure it will continue as long as the sale generates a commission and feeds the franchisors. As I said, what a great government program.
Oldsword you can't have it both ways. You have unclean hands whether you like it or not.
Guest
P.S. Your bullying won't work with me.
While I have no problem with increasing loans to the handful of legitimate franchise systems in existence, this program will enable the thousands of others to milk the system at the expense of taxpayers and poorly informed/fraudulently induced franchisee investors. Through lax, if not non-existent, oversight, the SBA allows franchise salespeople and franchise loan consultants to "guide" franchisees into placing grossly overstated revenue projections onto their loan applications in order to meet the debt coverage ratios required by SBA lenders - the true gross and net revenues for most franchise systems do NOT meet the SBA standards.
Of course the IFA is in favor of this proposal; franchisors and the IFA know how to scam the system by simply inflating the revenue projections. Loan approval guarantees payment to the franchisor and locks the new investor into a financial future that in no way resembles the picture painted by most franchisors, their salespeople and the loan consultants.
Banks loan the money and borrowers pay into the SBA guarantee pool.
Who pays in the end?
The borrower guarantee pool pays the loss and if that pool is exhausted the federal government would pay.
Umm, you might want to note that the SBA has been called on the carpet numerous times over the last few years because of the losses they are paying out. Not only to Republicans but to Democrats such as John Kerry when he headed the Senate's Small Business Committee. They are losing millions annually. I actually have a letter from Sen. Kerry to the Head of the SBA complaining about the lax oversight. But why let the facts interfere with your argument.
Oldsword I am correct. It is you who is fast and loose with the truth.
What about your misrepresentations in your projections for your SBA loan? How could a smart and honest person like you submit false information in order to get an SBA government backed loan?
You were lying then so why should we believe anything you say now?
Any suggestions on how a franchisee can figure out when buying a franchise that his franchisor and bank were supplying the SBA with standardized and bogus financial pro forma statements?
For that matter, any suggestion on how to get the pro forma statement that the bank uses on a franchisee's behalf before he is beyond the point of no return when he signs a franchise agreement?
First, you should ask our "guest" that keeps popping up. He seems to have all the answers.
All kidding aside, it is very difficult. However, the very least you should be doing is demanding to see the exact numbers being put forth under YOUR name to the bank and SBA for the projections. It is your assets being used as collateral for the loan so the franchisor could care less if the numbers are fraudulent. If the franchisor will not allow you to see the numbers on the loan application then run the hell away. Even if you do see them it is very difficult to verify the information. Franchisors will use phrases like "Yes, it is possible to hit these numbers." Sure its possible. But they won't tell you only 10 or so franchisees in over 20 years have ever hit those numbers in the first year and that it is much more likely that you will only hit half that number thereby showing a net loss for the first year.
Everyone here needs to get one thing straight. You will not qualify for the SBA loan unless you meet the minimum net profit requirements of the SBA on your projections. The SBA's Standard Operating Procedures Section 50 10(4) clearly states that the ability to repay the loan out of the cash flow of the business (net profit) is the most critical aspect of the loan application. In most franchisor cases, the net revenue for a first year franchise does not meet the SBA requirements unless you fudge the numbers. I believe the debt coverage ratio of around 1.2x - 1.5x must be met.
There is alot of talk about 'due diligence'. Unless the franchisor provides the real numbers in writing i.e. an average for first year franchisees (not an average for all because that skews the numbers up) or you are able to connect with franchisees that are willing to be forthcoming (by that, I mean willing to provide you with their actual income tax statements - DO NOT accept a verbal number. Most franchisees have two issues: first, they are afraid you might be spying for the franchisor attempting to see what information is being given out by franchisees and second, the franchisees want to be viewed as successful so many will scale their numbers up.) Even some of the franchisee association board members cannot be trusted. It is very difficult.
My view, from what I now know is if the franchisor is not willing to be specific with documented numbers I wouldn't even bother. However, some of the attorneys here might have a better way of doing things and may disagree. Whatever you do, do not take the word of the franchisor salesperson or loan consultant.
on your loan application, so stop trying to mislead people. If your numbers are false you are the falsifier.
You're right, guest, you caught me. I told the SBA's OIG's office all about this so I could confess. And, yes, I must be responsible for those very same projections appearing on all my fellow franchisees (from my system) business plans - including the ones from loan applications submitted before I ever spoke to my franchisor. And yes, I am also responsible for all of Cuppy's franchisees showing a first year net income of $175,000 (you know, the franchise system that is no longer because the zor and zees all closed down?). And, yes, I am responsible for all the Quiznos franchisees getting loans using numbers that, quite apparently, few are reaching. See a pattern? The SBA does. Especially when so many franchisees are sent by the franchisors to the same loan consultants.
Oh, and yes, all my fellow new franchisees knew beforehand that almost all the franchisees in our system lose about $100,000 in their first year (and not much less in the second year) but we figured, what the heck, why not put our homes and all our other assets up as collateral so we could open these things up, ruin our lives and families - hell, just for fun.
Before your next response do me a favor. Please get out of your chair and stand up. Its easier to pull your head out of your a$$ that way.
You lost your money because you are an idiot. You put an unrealistic business plan together, falsified your projections and lost your money. It was your responsibility and you are to blame.
It's hard to feel sorry for a fool like you.
Guest,
Would you stop whining about supposed whiners?
Concentrate on the issues and the article, and stop attacking the person posting. Let's talk about the article -- Obama's SBA boost.
I would venture to say that no one is interested in a discussion about Oldsword. Sorry. Attacking Oldsword is oldstuff.
This comment has been moved here, to Dear Franny. - Mr. Blue MauMau, moderator
Post new comment