Lenders regularly need to deal with small businesses experiencing financial pressure. Those dealings involve important decisions that seek to maximise the support they can provide the individual business and, of course, protect the lender’s position.

Not surprisingly, the COVID-19 Pandemic has delivered a large increase in the number of borrowers seeking relief. Accordingly, it is important to get a few of the basics right to make the lenders initial assessment easier and buy some time.

Make the initial contact. 

This sounds obvious but many borrowers under pressure waste precious time before getting in front of their lender. Lenders are not only expecting but encouraging reasonable requests for relief at this time.  Start now by encouraging affected franchisees to:

1. Identify their account manager or contact point,
2. Call them and advise they are experiencing or expecting some pressure on cashflow,
3. Ask for an appointment to discuss their situation, 
4. Confirm the standard information they would like to receive (refer point 2 as a guide).

Provide key information. 

Complete information at the franchisee level needs to be available for the lender to assess. This will normally include:

1. Last year’s full financial accounts package (profit and loss account, balance sheet and tax return),
2. Year to date profit and loss account,
3. Forward 90 day most likely cashflow projection,
4. Statement of personal assets and liabilities,
5. Personal expense budget.

Be well prepared.

Make sure your franchisees are well prepared. Complete, accurate and up to date information all build the confidence of lenders at a time when it is needed the most. It is important to get the help of their accountant, financial advisor, franchisor or someone close if they are not comfortable putting this information together.

Leverage your strength as a supportive franchisor.

Franchised businesses generally have a clear advantage over independent businesses when financial pressures emerge. Many lenders have already experienced the benefits of having franchisors standing behind their clients and providing increased and specific support to help their franchisees in times of pressure. 

Action plans that include the input of franchisors are generally very well received by lenders. If a franchisor is providing additional support lenders should know about it.

Reasonable request.

Finally, encourage your franchisees to ensure their request for relief is reasonable and respectful. Focus on deferrals of payments and restructures not forgiveness of debt or interest rate reductions. 

Remember, that lenders are the ones relaxing or changing arrangements. Shrewd borrowers will actually see this as an opportunity to create a deeper relationship with their lender and build a track record they can leverage in better times.

As always, if I can assist you in anything related to helping your franchise network get stronger with initiatives like these or others, by all means make contact HERE