This article is for the United States only. If you live in Canada, please click here.
Without a doubt, the world is living through a challenging moment in real-time. The root cause of our shared anxiety is in direct proportion to the uncertainties we face as the global pandemic of COVID-19 continues. Will the infection rate slow down and case rates disappear? How long will this health crisis last? Will our families be okay? When we don’t have answers to the questions we seek, we often revert to safe harbor strategies. At FranNet, we believe in sharing the latest updates that rely on accuracy and a balanced viewpoint for the consideration of our clients. In this blog edition, we’re going to cover down market strategies and several recent actions that may positively affect the franchising industry.
If you’re currently engaged in the investigative process of reviewing franchise concepts or have plans to continue your personal entrepreneurial journey, here are some facts you should know.
Financing & Funding
Arguably the greatest factor of going into business for yourself is the consideration of, “How will I pay for this?” While your FranNet representative is happy to take you through multiple funding options and introduce you to our financial partners such as Benetrends, here are some irrefutable facts about funding in a down economy:
- The Federal Reserve recently cut the benchmark U.S. interest rate to 0-0.25%
- Small Business Administration (SBA) loans lower needed cash on hand
- 401K rollovers and Portfolio loans have built-in collateral
- Higher loan approval rates, more funding options, and increased commercial real estate
Noted in a recent newsletter from Eric Schechterman, Chief Development Officer at Benetrends, the U.S. Senate Small Business Committee Chairman Marco Rubio (R-FL.) and Ranking Member Ben Cardin (D-MD) are proposing legislation ensuring the Small Business Administration and its lending partners are able to provide access to capital during the Coronavirus outbreak. The legislation is titled the Immediate Measures to Protect Against COVID-19 Threats for Small Businesses Act, or IMPACT for Small Businesses Act. The bill responds to the President’s request by including authority for $50 billion in 7(a) lending for the remainder of FY2020. It proposes several stimulus measures to be in effect for the duration of one year, including the following key provisions:
- Waives all borrower upfront guaranty fees for all borrowers, regardless of loan size
- Waives the ongoing fee for all lenders
- Increases the guarantee on all 7(a) loans to 90%
- Increases the Express maximum loan amount to $1 million from $350,000, and after 1 year, lowers the maximum loan amount to $500,000 rather than the existing $350,000
- Gives increased flexibility to the Economic Injury Disaster Loans (EIDLs)
- Benetrends’ letter, (download a copy), applauds providing the SBA and its lending partners more resources to offer relief while handling the economic impact of the Coronavirus
Business Outlook & Consumer Confidence
While no sector of the U.S. economy has remained untouched by the pending COVID-19 crisis, a recent survey conducted by a major franchise trade group revealed some surprising results on franchisee activity in the near term. Franchise Insights’ Buyer Sentiment Survey was conducted March 16-17, polling aspiring franchise owners as to their plans amidst this challenging backdrop. Here were some key responses:
- Over 54% think that “now is a good time” to start a business. 59% of respondents expect to start a business within the next three months, and another 17 percent within four-to-six months
- The majority of respondents (39%) believe that business conditions will improve in three months, while only 24.3% expect them to worsen
- Only 18% of the respondents indicated plans to put their business startup search on hold
We are living through a difficult time that, by all indications, may even get worse before it gets better. Without a doubt, deciding to make a franchise purchase and begin an entrepreneurial lifestyle is a life-changing event. The importance of maintaining a prudent approach to decision-making is something that FranNet will always recognize, support and champion. Conducting the right amount of due diligence on your journey cannot be overstated. But we wanted you to know that—even in the most trying of economic times—there may be situations that you can take advantage of to benefit the quest to become your own boss. Rest assured that FranNet is here to help guide you every step of the way.
Lastly, remember one thing. Optimism itself is an endearing quality. Time and time again throughout history, the right attitude has persisted in people’s endeavors—often leading to outcomes beyond our wildest imaginations. Let’s hope your shining moment is right around the corner as well.
If you would like to learn more, our team is standing by to answer all your questions and concerns. Please reach out and schedule a consultation with a FranNet representative that lives and works in your area.