Reid Lohr ⋅ Greenville, SC The EDI Group ⋅ 25 years experience

Phil,
The responses to date are quite good - especially the thoughts from Stephen. I have been involved in small & medium business development, including franchising, for a long time. There are good franchisors and there are others which I would advise staying away from. The key is to make sure you find one that is a good match for you, and make sure you do your due-diligence.
As for SBA loans, they do tend to look favorably on franchising because of the success-rates compared to normal start-ups. Again, it has to one in which has a record of success. The same is true for a variety of lenders - but in all cases, you will need to determine your own risk tolerance and how much $$ you are actually comfortable bringing to the table.

If interested, I would be happen to discuss this is great detail with you.

v/r
reid

Michael Kraft ⋅ Eureka, CA Sequoia Personnel Services ⋅ 25 years experience

I would add one thing to the excellent advice that's here so far, especially if you decide to pursue a new franchise rather than an existing one. Your SBA lender either receives, or can get, a report that shows franchise loan default rates. One fast food franchise company can have a much lower rate of loan default (which correlates with business failure, of course) than another. Not all franchises are created equal. I've seen amazingly different loan default rates within the same industry.

Stephen Stone ⋅ Virginia Beach, VA Sunbelt Business Brokers ⋅ 15 years experience

Good advice from Mr. Wilson. I’m a retired business broker who sold hundreds of franchises. In general, franchisers love Vets. You have proven you know how to get things done by following a system. My most important piece of advice is to only go into a business you would love to run. I always told buyers that the top three rules in buying a business is “Buy the right one for you”, “Buy the right one for you”, and “Buy the right one for you”. Buying a franchise because of financing will fail if you have to drag yourself out of bed to go to work. My second piece of advice is to look for an existing franchise to buy rather than start one from scratch. Statistics show that in three years 80% of start-ups will fail, but 80% of established businesses will still be in business. Franchises beat that fail rate, but the most important asset a business has is good will. That’s the difference between failure and success. Good news on financing – many sellers will provide seller financing, so no bank. How do you find an existing business for sale? Internet sites like Biz Buy Sell list businesses in you area for sale. But the best way is to find a business you would like to own. Then walk in and ask the owner if he would like to sell. On average 1 business out of 5 would consider a sale. What to pay? There are outfits like Gulf Coast Financial that specialize in business valuations. And many franchises have rules of thumb to guide you. Good luck.

Richard Filippi ⋅ Rye, NY Financial Industry Technical Services (plus various Global Banks) ⋅ 40 years experience

Thanks for your service. All these are great, BUT not all franchises are created equal. As an example I had read in the Wall Street Journal that Coldstone, the Ice Cream franchise has the highest default rate of franchisees. Look up any potential franchises on the SBA & Better Business Bureau web sites for this and other issues.

Best of luck

Rebecca Sobus ⋅ Omaha, NE Farmers Insurance District 46 Recruiting and Training Center ⋅ 20 years experience

Phil, I know that Farmers Insurance has a great program for Veterans that want to own a business. Farmers Insurance is an employer of choice for Veterans and we have a HUGE Veterans Recruiting department.
You have served your Country now serve your community

Farmers Insurance has subsidy available and veterans earn a contract signing bonus. Most small business lenders require 2 years of business ownership before they will lend money to a start up business. I took over a children's clothing store years ago and wasn't able to get a loan because I didn't have 2 years in ownership. Most Banks will want collateral before lending funds to a start up. Farmers Insurance gives people the capital

Contact your local Farmers Insurance District Office to see how you can serve your community.

Richard Ashe ⋅ Houston, TX Veteran Franchise Advisers ⋅ 30 years experience

Hi Phil,

All the posted information is very valuable and right on point.

Funding a business or franchise is challenging. Depending on the franchise concept, your skill set, your asset to debt ratio, financial proforma of the franchise, length of time franchisor has been in business, # of franchised units, franchise loan default rate, and the list goes on.

For franchises under $150K you may be able to get a SBA Express (aka: Veteran Advantage Loan) with 10% equity injection. Loans above $150 will require a 20% - 30% equity injection.

You did not mention the franchise investment in your query or how much you're looking to borrow. Those particulars would be needed to determine what is the best financing option for the franchise you're interested.

Veteran Franchise Advisers has resources that assist veterans with finding, vetting and validating franchise opportunities, access to legal and financing options as well. I'd be interested in learning more about your situation to determine if we have resources to assist.

Loren Davy ⋅ Monahans, TX Davy Business Capital ⋅ 1 years experience

The hardest part is finding a business that you are passionate about, if you love what your doing then you will never work another day in your life.

Some franchises offer their own financing for the franchise fee. If you need a loan, an SBA backed loan is one option. Typically, an SBA loan will have additional requirements beyond a conventional loan; but SBA loans also have a much higher business success rate. Most SBA loans will require a business plan (BP); if you take the time and really dig into the BP, you will address the majority of the problems you will encountered in your first year in business. Completing a BP is not a bad thing, but they are very time consuming. Its best to complete it yourself and not pay a professional BP writer; you need to dig deep and make sure this is what you want to do and answer the tough questions before your doors open.

The loan, you want the best terms for the lowest cost. All lenders will use some variant of the 5Cs (character, capacity, capital, collateral, and conditions) to determine the likelihood that you will pay the loan back. All lenders have niches that they like to work within; some like franchises, some don't, so find one that is franchise friendly. The financing side of starting a business is so important to your success, ask lots of questions, Feel free to reach out to me if you have questions, loren@davybusinesscapital.com.

Finally; most lenders are offering a $2,500 discount to veterans on SBA loans, be sure to ask.

Bill Blair ⋅ Holiday, FL Legacy Venture Group ⋅ 35 years experience

Phil:
you need to get SBA advice from an expert -call Jack Postregna VP @ Stearns Bank in Sarasota,Florida 941-328-6920 Stearns Bank loves to loan(guarantee loans) to Veterans
ask him what they do special for Vets - You should know that SBA loans are guaranteed by the SBA -they don't loan the $ -the bank does -but after a SBA favorable review of your credit -they will guarantee the loan. The loan is made when the borrower is putting down 25% -in some cases only 10% - but you've got to have some skin in the game - The SBA doesn't make funds available to purchase a business -they will assist an entrepreneur buy a business - if they have some $ to invest
make the call and find out.
Bill

Phil Garcia ⋅ Colorado Springs, CO U.S. Army, Sergeant ⋅ 6 years served

Thank you everyone for leaving a response to my post. I really appreciate all of the advice given to me. Thank you for taking time to give me advice.

James Mingey ⋅ Oregon City, OR Veterans Business Services ⋅ 25 years experience

On your question about firms that specialize in capital for Veterans it really doesn't matter. It's the best terms for you in your current situation I.e. Credit history and assets etc.

I would suggests looking at the SBA Franchise Registry to see if a franchise has met SBA financing requirements in the past. All SBA loans are made by banks and can provide roughly 75% of your deal

If you want a free consultation without obligation from a 100% Combat Veteran owned firm that specializes in Veterans check out Veterans Business Services. All Veterans get the best franchise values and discounts available in the industry.

On capital, for loans VBS recommends the following financial institutions: Accion (up to $300k but average loan below $20k), Kiva
($5k initial limit), Streetshares (up to $100k peer to peer lending platform), BoeFly (larger loans from matching platform including SBA)

For the best values check out a local community bank or a Community Development Financial Financial Institution (CDFI) in your area or the Community Reinvestment Fund in Minneapolis www.crfusa.com

Happy hunting!

And Stephen is right, whether you are buying a franchise or building your own "franchise" don't do it unless you think it will get you out of bed in the morning and will appeal to your passions all day.

Darlene Casstevens ⋅ Oxford, NC Liberty University ⋅ 13 years experience

Hi Phil,
I believe you would be better satisfied if you built-up your own business from scratch rather than franchising. Franchising is too expensive. Good luck!
Darlene

Kristin Garcia ⋅ Norman, OK The University of Oklahoma, Tom Love Innovation Hub ⋅ 15 years experience

Phil, these are great suggestions! I also wanted to promote that Stanford has a entrepreneur summer program for Veterans to give a crash course in business development. I encourage you to check it out and let me know if I can help you with your application. The deadline is 3 Mar 2016.
https://www.gsb.stanford.edu/programs/stanford-ignite/campus/post-9-11-veterans

Bill Blair ⋅ Holiday, FL Legacy Venture Group ⋅ 35 years experience

Phil:
I have been a business broker for 10 yrs here in Florida, and I would strongly urge you to only consider buying an existing business. 1.should have successful/provable track record. 2. 3 year financial history would indicate proven profitability. 3. you are your own boss 4. you keep all your $ (no franchise fee) Contact a business broker and share your plans with him. Keep an open mind and he will show you some businesses that are profitable that you might enjoy owning. Don't know how much $ you have to invest? In Florida the minimum is $30k to play.In Florida any business selling under $1m will have to have seller financing -that's good for a buyer, don't know how Co. works. We have to be licensed by the state and are regulated to maintain both seller and buyers best interests. If you had $30k to put down -in Fl you could buy a business selling for up to $200k earning $100k. Search for a good broker and use his experience of the existing market in Co. Ask him about franchises Steve worked for a good brokerage firm -Sunbelt Business Brokers -I did too! I've bought ,owned and sold 3 businesses in Florida over the last 20 years, I'll bet they have a Sunbelt in Co.
Good luck
Bill

Jim Wilson ⋅ Richmond, VA Wilson Law Group ⋅ 20 years experience

There are a number of Franchise systems that have veteran friendly programs. The easiest way to see them is to check out the VetFran website. Most of these provide some discounts on the franchise fee, but some offer financing for the franchise purchase. Another deal I learned of recently is from Sam's Club. They have small business financing deals with greatly reduced fees on SBA loans. You have to be a member to get this financiers and I am pretty sure they are available on line at the Sam's Club website. Fees on SBA loans can be quite high. They get rolled into the loan, so you pay the over the term of the loan, but you still pay them.