I'm trying to get a SBA loan for a national fast food restaurant. The bank is asking for 50% cash of total loan up front, and the rest will be a loan, which will require a real estate or cash collateral.I said that's a bit steep because the government is guaranteeing the loan, and I have to put up 50% cash up front and the rest will be tied in personal property/asset. The banker stated that this is standard with restaurants (and sadly, according to the banker, they don't really distinguish the risk between a Joe's Hamburger Shack, and let's say a Burger King-ex of national franchise) because of the risk involved, but then what business doesn't involve risk. Would a used car dealership have less risk than a national franchise restaurant?Is this the standard with most banks to require 50% cash down and 50% loan? Or are there other banks that will require less?Thanks in advance.
It really depends on the bank and their policies. All banks have different policies based on what they want to loan against and what they perceive as risky. It almost seems that the bank you are talking with either wants 100% collateral (meaning a totally secured loan) or they don't really want your business and this is their way of saying so with making you mad just in case your business does take off and they want to be your bank after that.
You can shop around with other banks in your area or even seek out nationally qualify SBA lenders that you can find on this site.
Have you talked with the franchisor to see what they recommend? Many have internal financing arms or have preferred relationships with specific lenders that may not require as much as your bank.
Do know that in these times, the banks have the money and that means they have the power and when it comes to small business lending they are using that power.
We have a free search engine on our site for business owners seeking capital. No cost to use. Plus, information and resources for owners seeking capital. Might be a place to start.
Also, not knowing your situation, many franchisees are taping their retirement accounts (401Ks, IRA, etc) by setting up a corporation then investing those retirement funds in that corporation. The idea here is that it is your money and the only approval you need is your own. Plus, these are not loans thus you pay no interest (no payments at all). Then, when your business starts to cash flow, you can begin to return those funds.
ngoriel | Community Moderator | 8/15/2011 - 3:25 pm
phanio | Contributor | 8/11/2011 - 4:51 pm
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