Tracey Deschaine’s suburban Philadelphia restaurant, Dixie Picnic, has a lot going for it. After years of refinement, the concept boasts a fiercely loyal customer base. Annual sales are approaching $1 million. The business has no debt and returns enough profit for Deschaine and her husband to live comfortably.

“The business is doing well,” she says. “People think we’re printing money left and right. At least once a week, people will come in and say, ‘Is this a franchise?’”

It isn’t.

But Deschaine sees franchise potential with Dixie Picnic. She believes the Southern-inspired menu would work well in a chain, with central commissaries pumping out fresh-baked goods to individual stores. At the very least, she’d like to see her single-unit concept grow, penetrating the richer market of Philadelphia’s bustling Center City district.

“We’ve shown our numbers to some people,” she says. “People say, ‘Well, you get to three units and people will be interested in you.’”

But her expansion efforts have been fruitless. A Great Recession–era home foreclosure and a bankruptcy have put conventional means of financing out of reach. Those major credit dings have left her with few options for expanding an otherwise successful business.

“You wish the government had a program for people like us,” Deschaine says. “OK, you have bad credit, but you’ve got a business that’s working. If I were too big to fail, they would have the money. If somebody would just look at my numbers, not my credit score.”

“A tale of two cities”

Experts say the capital market has vastly improved since the Great Recession, when banks all but stopped lending. Yet the lending market underwent a fundamental change: Bankers remain skittish, especially about unproven concepts and borrowers. They have stricter lending requirements. And they increasingly only want to bet on a sure thing.

“Ever since the last recession, it’s been a little bit of a tale of two cities in the sense that larger franchisees have gotten an easier time to borrow money,” says Aziz Hashim, managing partner of private equity firm NRD Capital. “And for smaller franchisees, a lot of banks have kind of given up on them, because there were a lot of losses.”

He says banks and bank regulators have gone too far in trying to prevent another financial crash. Their precautions favor the big players getting bigger, which threatens to stymie innovation.

“They tightened things up so much [and] the pendulum swung so far that we need it to come back,” he says. “We need to allow banks to take some risks and possibly take some losses. That’s the price of innovation.”

Hashim, who is chairman of the International Franchise Association, says today’s environment leaves little promise for potential borrowers with credit woes, like Deschaine, to obtain traditional financing.

“I think it can be overcome if people don’t take a one-dimensional view of financing—that is, traditional financing,” Hashim says. “Let’s call it a crowdsourcing method. People need to look at it as more of an equity participation rather than going to the bank. Because those type of bank financing situations simply don’t exist today.”

He encourages restaurateurs to tap into friends, family members, and the ever-growing network of angel investors who have cash sitting in savings accounts and barely accruing any interest. Those people have more incentive than bankers to extend riskier loans, he says.

“It’s not easy. It’s a lot of doorbell ringing. But you have to do whatever you have to do to grow. You cannot just sit there and expect people to throw money at you,” Hashim says. “The time for someone to be looking for money is exactly when they don’t need it. … It’s not rocket science. It’s hard work, but it’s not hard to find.”

Adding up the numbers

Dixie Picnic was born from Deschaine’s rich childhood memories visiting family in North Carolina and Virginia. In the heart of Dixie, the family dined on sandwiches and deviled eggs in parks and on beaches.

The brand’s scratch-made menu, which includes po’boys, pulled-pork sandwiches, and goat cheese praline salad, was designed to be reasonably priced. Deschaine describes her food as “simple, fresh—something you could eat more than once a week.” A signature item at her restaurant is the “upcakes,” which are frosted, upside-down cupcakes made the same way her aunt prepared them for her childhood picnics.

After 30 years as a nurse, Deschaine opened the first Dixie Picnic location in 2006 on the Jersey Shore. Business started strong, but the Great Recession came hard and swift; banks pulled their credit lines. Her husband lost his lucrative real estate appraising job. Deschaine couldn’t even sell the Ocean City, New Jersey, building at a discount.

As cash flow screeched to a halt, she was unable to make house payments, causing Wells Fargo to foreclose on her home. In 2008, she regrouped and moved the restaurant to a 2,300-square-foot facility in Malvern, Pennsylvania. She turned her attention away from the tourist crowd and toward workers in suburban office parks.

Since then, she’s refined the concept as she’s petitioned experts for advice and attended restaurant finance conferences. In recent years, the business has posted year-over-year sales growth of at least 15 percent from a location that Deschaine describes as a subpar spot in a strip mall. In 2015, the restaurant brought in $745,950, and sales were projected to reach nearly $860,000 by the end of 2016. Deschaine expects sales to top $1 million in 2017.

But those sales have not been enough to make up for losses suffered in the recession. After 10 years battling the bank to get their home mortgage back in good standing, Deschaine and her husband declared bankruptcy in 2016 to save their home from a sheriff’s sale.

“Because of this one stain on our record, I’m sure [banks] just Google us and see that,” she says. “They don’t even want to look at the numbers of the business.”

In favor of franchising

Tom Coba, partner at Premier Franchise Advisors, says banks in the post-recession era are pickier about who they lend to.

“In the good-old days, it was pretty easy,” he says of finding financing. “Now it’s much more severe. It’s a lot more paperwork. The banks are demanding a reasonable equity contribution—so, 20–30 percent is not an unusual ask. It’s also not unusual for banks to require personal guarantees now. In some cases, people are putting their houses on the line to grow their business.”

Aside from looking for venture capital or private-equity funding, Coba says, less creditworthy restaurateurs may want to consider selling a stake of their business in order to fuel future growth.

“That’s getting a little bit creative and a little bit lucky at the same time,” he says. “It’s finding the right people, matching up the right situation.”

Otherwise, a franchise model may be the best route to recruit outside funding.

“If you look at it through a different lens, a franchise model is a form of financing,” he says. “You’re using other people’s money to grow your brand. Obviously they’re entrepreneurs. They’re investing in that brand because it has a proven track record.”

Having a track record makes lending easier for established brands. Take, for example, Roy Rogers. The quick-serve concept has been around for several decades, and has well-documented sales numbers—both good and bad—to show lenders.

“The bank is more readily available to fund our franchisees because they already understand the concept,” says Ed Prensky, CFO of Plamondon Hospitality Partners, franchisor of the brand known for its burgers, roast beef sandwiches, and fried chicken. “They have 20 years of historical financial statements from Roy Rogers. They know the ups and downs. So when our franchisees come for help, they are able to put together a package quickly and help develop other stores.”

Banks are so eager to lend to a sure bet like Roy Rogers that they’ll often pre-emptively call and ask about the company’s financing needs, Prensky says. Franchisees continue to tap into longstanding relationships with community and regional banks to find cash for new developments, store improvements, and equipment upgrades.

While financing has become more available in recent years, Prensky says, the post-recession environment is fundamentally different. Banks want borrowers to put more of their own skin in the game. “It’s not like the old days, when you could finance 110 percent of your development,” he says.

Prensky adds that most franchisees come to the table with strong credit histories, and while there are some credit dings here and there, they’re not necessarily deal breakers. The company might work with a potential franchisee with a record that included a bankruptcy or foreclosure, depending on how it was adjudicated and how long ago it occurred.

“If it was just last year, we’d probably have some issues. But if it was seven or 10 years ago and it was during the recession, I think we’d certainly give that consideration,” he says. “However, we could turn around and say you’re a great franchisee and we grant you a franchise, [but] if they can’t get financing from a bank, it doesn’t do either of us any good.”

The sweat-equity solution

Randy Evans, an attorney at Monroe Moxness Berg PA, a Minneapolis law firm specializing in multiunit franchise finance, says large, multiunit operators can usually secure big funding deals through a “one-stop-shop” solution. But those franchisees thought to be unproven or unworthy often need to put together a patchwork of funding sources.

“You’re probably not going to find a lender that’s going to finance the entire thing,” he says. “Maybe a local bank is willing to put a little money in, things like that. It’s just a little bit more challenging. It’s a little bit more of a puzzle to put together to get the amount of capital you need.”

That means the toughest-to-fund borrowers must put in a lot more sweat equity to find the right investors, he adds. “I think you really have to do a lot of it by yourself and knock on a lot of doors, and hopefully, eventually you find someone that believes in you and your concept.”

John Berg, another attorney at the firm, says finding funding becomes easier with each new successful unit an operator opens.

“Every time you open up a new store and it’s an incrementally positive store, your story gets increasingly strong,” he says.

Berg adds that credit woes aren’t exactly new territory for quick-service operators. Plenty of successful operators have had credit issues in their past and overcome the challenge to build profitable businesses with borrowed cash. It just adds one more challenging layer to the process of getting a business off the ground, he says.

A closing window

For her part, Deschaine feels like she has exhausted all her options. She’s looked into private investors and Small Business Administration loans. She doesn’t have any wealthy friends or family to lean on. And she fears alternative funding methods, like merchant cash advances, would suck too much cash out of the business.

“At 62, I just feel my windows of opportunity are starting to close,” she says. “It’s discouraging, because I think we’ve got a great thing.”

For now, she continues to scour available leases in the heart of Philadelphia, looking for a location that she can fund in-house. She hopes continued expansion in her catering business will help propel the restaurant’s growth within the city. She’s even thought about acquiring a food truck to bring her food to downtown Philadelphia.

Deschaine insists the drive to grow Dixie Picnic isn’t just about increasing her own dividends. The restaurant is strong enough to provide a living for her and her husband. But she wants to see it grow to its full potential, which she says would allow her to reward her employees who have stuck with her.

“They’ve drunk the Kool-Aid. They know where we’re going. They see us growing and growing every year. I hope and pray to get them to the point where this guy who’s making sandwiches is the general manager of our next store because he deserves it,” she says. “It’s not just for me. I want to share the success with people who helped us get this far. And if we just stay with one unit, we can only go so far.”