Franchise loan with bankruptcy

businessman, laptop, stocks-5647719.jpg
>funding to purchase this franchise?
Posted by: Steven Aug 18 2004, 03:30 PM
I was searching through google and came across this forum so I figured maybe I could ask and see what I would get.

I am currently looking to purchase a franchise, a personal training studio, and need about $170,000-$200,000 to get started. Here is where my problems come into play.

I had a bankruptcy almost 4 years ago I believe October will be 4 years.
My credit has been stellar ever since my score is around 630 now and continues to climb.
The only assets or money I have available is about $15,000 in a 401k. So I would have no money to put into my business.

Is it impossible for me to get funded to purchase this franchise? If so what options do I have and what time frames am I looking at?

Any help would be greatly appreciated.
Posted by: loanuniverse Aug 18 2004, 06:35 PM
Honestly, you will not get financing from a mainstream lender for this endeavor. In fact, I doubt it that a non-bank financing company would be interested in it.

All I see is negatives.

– No equity investment.

– Credit history just shy of horrible, 630 score is good, but the bankruptcy trumps it.

– Startup

– You have no personal financial strength that would provide additional comfort.

Let me not be completely negative and say that the fact that this is a franchise might give you access to information that is not available to a regular independent startup.

Your only realistic option is to get an equity partner. I would normally say SBA, but the fact is that you would still need some kind of equity investment for a loan supported with an SBA guarantee.

Good luck

Posted by: Commercial Lender Aug 20 2004, 02:52 PM
As the admin said there are more negatives that are obvious than any positives. This is not to badger, but to give a diff prespective;

– “B” credit
– Limited Liquidity
– Buiness Experience

If you were to apply for a… say…. subway, 7-Eleven or DunkinDonut franchise they require anywhere from 80-200K+ to be shown in liquidity. It is necessary to have to liquidity for not only the startup, just in case something happens….the first month is a slow one etc but also for the franchise fee. The bankruptcy will also be an issue and almost every one will ask you to explain it to see if you coudl not manage your personal finances or if you really had an unfair ordeal to deal with. SBA is a good option but dont think the SBA will be a savior to the rescue. In my experience, they will often take a 2nd lein position behind a primary lender but will not ‘fully’ stick their neck out. Why should they?

Also, the issue central to this is that of a ‘vested interest.’ AKA the blood, sweat and tears. Banks and lenders will look for a vested interest. Even your franchisor (or a bank for that matter) will ask what is your interest….if is a minor amount…..(15K) you will most likely not get any attention muchless any financing.

If you can, get in to the business as a manager of a similar facility, gain some hands on experience, and as the admi reco’s get an equity partner and break the 700 mark on you credit score.
Posted by: Hardcase1 Aug 21 2004, 04:02 AM
Hello Steven,

I can help you with this dilima.
Author: Commercial Loan Underwriter