Direct Capital

From the pages of Restaurant Franchising
Faced With Many Projects, Franchisees Turn to Direct Lenders For Help

In the franchise business, a typical year may include routine investments such as remodels, equipment or technology replacement, or expansion projects like store development or acquisitions. Often times these projects require expedited funding from a direct franchise lender with the experience and funding capability to providing the best finance terms. This is where Direct Capital steps in to help.

“We have a deep understanding of the franchise space, an industry we have been lending to for nearly 20 years. We have a dedicated team that works with both franchisees and franchisors to understand the financing needs of the system and build products to meet those needs,” says Robyn Gault, vice president, strategic accounts at Direct Capital.

The company focuses on loans as little as $2,500 up to $1 million. “A lot of lenders require minimum finance amounts of $250,000 to $500,000 and some up to $1 million. Our programs fill a lending void for the smaller operator looking to remodel or expand or the large multiunit operator who may be capped with existing lending relationships and is looking to diversify. We offer working capital, for example, for someone who might need a boost in cash flow during a slow season. For bigger needs, such as new store development, acquisitions, and remodels, we can finance up to $1 million,” Gault says.

“Our team of finance managers is aligned with each of the core brands we support. This approach brings greater value to the franchisee and allows us to understand their short- and long-term expansion, remodel, and upgrade plans. We structure each transaction with an eye towards helping the franchisee with the current project and supporting them in the future,” Gault says.

“Franchisors are seeing that their role in educating lenders can have an impact on the lending window and program terms available to franchisees, which becomes a lynchpin to supporting the development and remodel plans for the brand.” —Robyn Gault, VP Strategic Accounts

Because the company is a direct lender, turnaround is faster, and rates are lower than what a borrower might receive from a broker. “It’s an additional service point that franchisees like because they can call us with questions on the existing transaction or a request for additional funds to support a new project, and we can respond directly. That’s attractive to someone who needs answers quickly,” Gault says.

To expedite the finance process, Direct Capital offers online application submittal, approval, and documentation capabilities. For loans less than $100,000, the approval can be processed online within four to eight business hours. “A simple finance process is important and allows franchisees to get related suppliers and contractors paid more quickly to finalize orders and delivery, which can help positively impact the project timeline. Once the final online documentation is completed, we can begin releasing payments,” Gault says.

“Rates are risk-based and are a combination of several different factors, including personal and business credit, the borrower’s time in business, and the brand. Personal and business credit history are often good indicators of a borrower’s ability to repay,” she says, “but we are also looking at the strength of the brand as part of the underwriting criteria. A borrower may have less than perfect credit and still have the ability to secure an approval because of the franchise brand they are operating.

“In recent years, we have seen a broader movement by franchisors to be more proactive in establishing lending relationships for their franchisees. They’ve taken strong steps to be engaged with lenders,” Gault says, “working with us to get key brand performance statistics into our hands upfront. They want us to have a good understanding of company plans and past history. Franchisors are seeing that their role in educating lenders can have an impact on the lending window and program terms available to franchisees, which becomes a lynchpin to supporting the development and remodel plans for the brand.”

For more information about Direct Capital, visit www.directcapital.com.