Lance Hood (FranPro): 0:00

Hi everyone. Today we have Dan Pace, the founder of First Financial Dan, welcome to the call.

Dan Pace (First Financial): 0:07

Lance, pleasure as always to chat with you. Thank you for having me.

Lance Hood (FranPro): 0:11

Well, on this call, I really want to get some of your insights that you've learned over the years and maybe definitely some actionable steps that people can take to utilize this. You have a background in not only being a business owner, but you have a background in all of this and you help people with funding. What do you think on this call would be one of the most valuable things that we could talk about to start the call.

Dan Pace (First Financial): 0:40

Well, there's so many topics out there, but if we're speaking about a potential franchisee dealing with the franchise or I think the key there is they have to take the time, lance, to be honest, and do their due diligence stage and find the right franchise that fits their passion. I see a lot of people who are just out there and they go well, gee, this kind of thing is making money and this kind of thing is making money, but I don't like it. I think it's taking a valuable step. I know when I first did mine, I knew what my passion was. When I opened my first franchise, it was fitness industry. I loved it. I loved to work out, I loved the fact that I could make money and I hate to say it, but back then I was younger I used to get to meet girls too, all in one spot. To me, that was a win-win type of business they have. I think people have to put that same expectation minus the women, obviously. But you got to do it. I love what I do now. I know you love what you do right now. It's no different from anybody else.

Dan Pace (First Financial): 2:05

You have to engage with numerous franchises and find the one that's going to work best for you because you're building your own brand. It might be a franchise, yes, but it's your franchise, it's your territory and you're building that brand. So find the right one, be proud of the one that you pick and go make it happen for yourself. I see too many people that don't. Oh, I want to be absentee or I want to be this, I don't know. But you have to get to where you want to be.

Dan Pace (First Financial): 2:47

I provide the financing. But if I'm talking to a client and you're saying to me I like this, I'm not really 100% sold, but it looks good, so I think I'm going to do it that kind of gives me an unhappy, unfuzzy feeling as a lending partner. I kind of look at it and say, well, maybe you might want to go back to the table. So it's a hard thing for consultants and coaches to have to deal with and find it, but I really believe that's the key Find something that you're going to be passionate about and build it Right.

Lance Hood (FranPro): 3:24

Yeah, absolutely. I mean, my first call with people is generally about an hour and it's really opening their mind up to what's available and then narrowing it back down to what makes sense for them according to them, on all the factors what they like, what they can afford, just the aspects of the business and all that. So otherwise they're not going to stick. If you just show people stuff that they really aren't, you haven't dialed it in to where it hits all their passions and they're excited. It's easy for them to walk away. So you definitely have to find stuff that meets what they already believe they want. And money seems to be important. But what I have found is if people that just lead with money rarely close because they're just flipping rocks and curious and there's always something else that could make more money. So it's hard to satisfy that. On the other side, if somebody is like it has to be my life purpose, those people don't close it.

Dan Pace (First Financial): 4:36

I understand what you're saying without yeah.

Lance Hood (FranPro): 4:39

It's like what you said it's right in that middle, finding something they're passionate about, that works for them, but not playing to the far, far extremes.

Dan Pace (First Financial): 4:47

Yes, and we can laugh about it. But I'm sure you see it, I know I see it frequently. You can tell when a person is passionate about what they're looking to do compared to someone who I call them tire kickers. Okay, I got this one, and then next week they call me and say well, look at this one, I think I want this one now and I know this one. I try to do the best I can. Like I said, my goal is the financing side. I have to flip it back to you, lance, when it comes to maybe you need to speak the Lance and he can run over the different things with you on the franchise side. That's why we're a team. You have me for the financing, I have you when you send your clients to find them to write franchise. I'm not a franchise guy, I'm a. I volume them, but I don't know which brand is better than the other brand you know for clients. So I rely a lot on you to do it. But you are right, it's a topsy-turvy thing that we deal with every day.

Lance Hood (FranPro): 6:04

What would you suggest? How can potential borrowers become more fundable? Like so talking to a borrower, but also, you know, maybe you have a broker or a franchise or that needs to give them some advice too, Like, what can they do?

Dan Pace (First Financial): 6:21

Well, that's a good question. I think you're the first person that's ever asked me that I'm a little taken back by it. I'm just it's to be more fundable. That question to me means is what does this client look like on paper for a lender, a bank, whatever it may be SBA, conventional, and I think it has to be a person that, at least for me, I'll speak for me.

Dan Pace (First Financial): 6:56

At my lending institutions we look for stability. I want to see a stable person. I'm not saying so much about their net worth, their liquidity. Is that person stable? Have they lived in the same area for a few years? Has it been a person that's moving from one apartment to another apartment, to another, one state to another state?

Dan Pace (First Financial): 7:25

You know, stability is one of my biggest things. When I'm looking at that and when I look at somebody's credit report, obviously you can see the stability. Now, do I want them to pay their bills on time? Certainly I do. But credit worthiness and long worthiness depends on multiple factors and it's not always based off of the individual client. You could bring me a client that is stellar and let's say he wants to buy a resale or it's a startup business, and I look at our portfolio and it's not performing, I'm not going to do it. If I look in there and I see, jeez, I got 20 out of 100 loans that we have, we got 20 of them that have defaulted. I don't care if he's got the best credit and net worth in the world, we're not going to buy it just because of default. So it's a multitask question.

Dan Pace (First Financial): 8:29

When you bring that to the table, the ideal candidate is someone with stability, someone that has a little liquidity to invest of their own let's call it skin in the game. Somebody who has been around the work environment, not necessarily owning their own business, but knowing how to operate a business. Someone who's married or not married, but has outside income. There's all of these different factors that we put in to every potential client that we look at. That's the reason for the pre-qualification process that I've talked to you about in the past. Why would you have a client look at a business that's a million dollars or a half a million dollars all in, not knowing that they would qualify for that, for a loan, if they need it?

Dan Pace (First Financial): 9:36

That pre-qual is how I adjust for that. I can qualify somebody within four to five hours of getting the information that they give us so I can come back to Lance and say, okay, lance, and talk to the client and say this is what I'm comfortable to do, this is how much I'm willing to give you. This is how much doubt I want. This is your interest, right? This is your term, and then take a step back and let you guys do what you're supposed to do. That's why I was taken back about the question, because it's hard to to tell somebody what they have to look like. I have to see what you look like and from that point I can tell you this.

Dan Pace (First Financial): 10:24

I can say you're not gonna get along by yourself. You might need to bring in a partner. Or I could say you're having this issue. You know there's a credit issue. Maybe you should talk to our credit advocate guys and get that cleared up, and then you would be fine. So there's multiple things. You got a lack of collateral, you don't have enough net worth. It could be multiple reasons. Or I could look at it and say you're perfect, this is what we wanna do.

Dan Pace (First Financial): 10:57

This is how we move forward. Every person deserves their own look through, whatever lender they're at. Okay, everybody's story is different and you have to take the time and look at their story. Okay, I could give you hundreds of examples of things that I run through. One of my biggest is always when somebody lives talking to. A client now lives in the state of Washington and he's moving to Ohio. He's moving and packing his family up cross country and I gotta figure out before he does that. Or we're gonna be willing to give him a loan, but he leaves point A to get the point B. So everybody's story is different and my staff, I, we all know that you have to look at everybody individually. That's how you can tell if they're ready to move forward.

Dan Pace (First Financial): 11:57

It isn't. I suggest to anybody they should speak to multiple people about financing. You're gonna bring up a question in a little bit and we'll talk about that. But it doesn't hurt to talk to your local bank and see what they say. It doesn't hurt to go out and talk to multiple banks as long as they're not pulling your credit and shopping your loan around, as bankers call it. But if you've got the right lending partner, they're gonna know the answers once you start talking to them. I can tell from a client within five minutes on the phone are they really serious about doing this, do they? You know what do you. You know what do I think they're gonna want and what are they gonna expect. So that easiest way is it's a challenging question for people because everybody's different, lance, and I answered exactly the way you wanted me to, but it's not an easy question to be able to say it's A and B, it's A to B or B to C, it's A to God knows what. To figure it out.

Lance Hood (FranPro): 13:13

So after you first speak with them and you kind of get a good look at it, that's where your pre-qualification comes in and gives them a good idea of here's where you're at, here's what you could possibly do and here's some suggestions on how to bring that up.

Dan Pace (First Financial): 13:26

Yes, I get. I mean most of the consultants and coaches and zores that we work with. They all send us clients via email or however. They do it through their portals and the main thing you see at the bottom is can you please pre-qualify this client before we start our process? So think about it realistically. A franchisor doesn't wanna spend a month talking to a client about purchasing their franchise and not know if they're gonna qualify to purchase it. A consultant or coach shouldn't spend months and months talking to a client, shouldn't even spend weeks talking to a client unless they know they're gonna qualify for some type of some type of financing if they need financing. If someone says to you you know, I'm good, I don't need financing, I'm gonna sell fun, then that's wonderful. There's no need for me to talk to them. But that's all case by case. After you speak to them and if they need the financing, you reform and then I handle it and then I pre-qualify them and then you know the franchisors know. So it's really just a step by step process.

Lance Hood (FranPro): 14:46

That makes sense. And so what is the difference? I mean, you talked about working with someone like yourself. That's really, I think you kind of see. I think you kind of specialize in franchises. You do a lot of things, but you know what you're talking about when it comes to that. Or you know your traditional retail bank, because when I first got started, I thought you know a bank's a bank and the bank they're always super friendly. They're like, yeah, absolutely, we can do that for you. You know, we can get you the loan. We're gonna introduce you to Mike and Mike's like, yeah, sit down and talk. And then it's usually the person above them that they talk to and they're like, oh, yeah, we can't do that. Or we've done a franchise, like we've done one, you know. And so what for you know, for people who are listening, and then we're gonna focus mostly on things that I think that the brokers and the franchise owners would wanna know. But if somebody's new to this and they don't understand that it's important to connect people with a franchise, specific lender.

Dan Pace (First Financial): 15:44

Yes. Well, you have to understand lending institutions are all set up differently. I don't care if it's the big boys, the Chase, the Wells, the cities or the smaller citizens, or US banks or whoever it may be. Whatever the lending it companies like ours, you know everybody has a different appetite for the type of business that they want. But where the issue comes in is most banks are retail banks. They care about the FDIC, they care about your checking account business. They want you to get credit cards with them, do car loans, get your mortgage. That's retail banking.

Dan Pace (First Financial): 16:30

I have to admit that's something that I did not spend a lot of time in in my career because I wasn't interested. I wasn't interested in sitting in a brick and mortar building all day long waiting for clients to come in and ask for a loan. But when you go to these local institutions or even your own bank, 99.9% of the time they don't even have a rep inside the bank. For the company that knows anything about business loans I don't care if it's conventional or SBA, it's all outside of the office and I don't know if it's the big boys. The person you're talking to is just a yeser. Yes, I will find out for you. Yes, I will do this, but by no means should somebody take going to their own bank, where they have their deposits and been banking for years and pay off their mortgages and think that if they decline me I can't get along somewhere else, because that can't be farther from the truth. I have done multiple, multiple, multiple clients who have went to their own bank and then came. Thus the difference between a lender like ourselves that really is more of a wholesale In the banking world it's called wholesale. We only deal and there are quite a few banks out there that only, or lending institutions that only deal with loans, loan origination, it's called, and we, specifically, we do mom and pops, don't get me wrong, but most of our business is from coaches and from franchise owners. So obviously we understand the franchise world, so I can find things out relatively quickly and if it fits and you're financially strong enough, there's no reason not to do a startup business for somebody, especially under SBA. Let's be honest, the SBA was designed for startup businesses. That's what put it in place when Dwight D Eisenhower was president in 1953. They did that to stir the economy for entrepreneurial people. This is small business week and we're having this meeting, so that's a wonderful thing. But there's no reason to think that you can't get along if you talk to the right people. There's multiple companies.

Dan Pace (First Financial): 19:13

I'm not here to just plug first financial. I'm here to say if you're an entrepreneur, you have to do your research. You got to find out what you're interested in and then you reach out and then you talk to Lance, like you, you know us, so you refer people to Karen Perkins in my office, who you work with. That type. That's how you move forward. It doesn't cost you anything to talk right and we teach you what it has to be.

Dan Pace (First Financial): 19:50

And so I don't want people to think that going to their local bank is a bad thing. It isn't. Maybe they won't do you alone for you, but most banks are not in the startup business. For startup franchises. They're just not Maybe resale some of them we'll look at but a majority of them will come in and they'll say, well, if you have equity in your home, we'll loan you against your home and you can go open the business Type of philosophy, because that's what they're geared to do. That's retail type of banking. Or we'll give you a personal loan. There are that type of stuff. Once again is retail. So I think that's the big stepping point for people. Just because you might get the client once doesn't mean you cannot get a loan. You have to talk to the right folks.

Lance Hood (FranPro): 20:48

Right, and so for a franchise sore. So I own a franchise and I want people to be able to be funded to buy my franchise. In the eyes of the lenders and in the eyes of the SBA, what are some things that make me attractive to be funded for these loans? So what should franchise ores understand?

Dan Pace (First Financial): 21:11

Okay, that's a very good question. I try to explain it a lot to franchise ores. There's been some changes, especially in the SBA side. We used to have a thing called the registry and then they changed it to the directory and what that means is every year if you want the franchise or wants to be approved for the SBA for us to write loans under SBA, you had to be on that directory. Okay, that means that every year you had to send your FDN to the SBA out of California is the legal department that runs that and then you prove your franchise and they enter you on the directory list. That list is going away. To be perfectly honest, some bankers don't care, some do. I'm a carer. I think the directory was a wonderful tool because what it did was it allowed the SBA to vet the franchise or and make sure that their FDNs were focused on the client, what it was gonna be, and if there was something in there they didn't like, they could talk to them and change it. Well, as of May 12th, that will not be in place. Everybody's kind of protesting it a little bit. From what I understand, it's gonna be null.

Dan Pace (First Financial): 22:44

Now there's quite a few franchises that are on the directory there's over 4,000 franchises. A lot of guys have re-opped because it makes it easier for lenders to say, okay, they're on the directory, we can look at the reports, we can get their FDN, we can check the Coleman report, we can see all these things. It's going to change things a lot, in my opinion, because now lenders are gonna have to have their own department to review FDNs and it's gonna be a little sticky in the beginning. I don't see any problem with the existing guys that have been out there, that have been on the directory for a year, two years, 10 years. Where I do see an issue is the emerging brands. We're definitely gonna have to spend more time.

Dan Pace (First Financial): 23:40

I have sent every emerging brand I know that I've spoken to, to the SBA just to get on this directory, even though it's gonna disappear because now we know it's there. But I see that process might be a little more difficult for the franchise award. So they're going to have to spend time with the lending companies that they choose to work with and be vetted by the lender. So in other words, I'm doing a couple of emerging brands or guys I've known for years started their own franchise. Is kind of what you just said to me. I've already vetted the FDNs. I've already had our head of credit review the FDNs, so we're good to go.

Dan Pace (First Financial): 24:22

But that's a process that takes time. Lance, I'm sure you've looked at FDNs. They're not two or three pages. There are some cases 250 to 500 pages of documents that you have to go through. But it's a process. It's gonna take a little bit. Franchisors are gonna have to relax a little bit. For people, the emerging brands, all the other guys we shouldn't see any issues because we still can get reports on how they're performing. My bank, we put a lot of effort into the financial disclosure documents.

Dan Pace (First Financial): 25:00

Anyhow, I don't necessarily go by the directory, but the reason the directory was there was so we knew that they were approved with the SBA so we would be able to file our guarantee. Sba loans get a guarantee back from the federal government and if they weren't on the directory you didn't get the guarantee, you couldn't write the loan under SBA. Now all that's gonna disappear because there's no directory. So it's gonna open up the marketplace with a lot of franchisors that didn't qualify to get on the directory. I kind of wanna say in a kind way, the first few months I would say June, july and August are gonna be like the old West.

Dan Pace (First Financial): 25:51

You're gonna see a lot of franchises want to get financing that didn't qualify for one reason or another. There's a lot of different reasons. It doesn't mean that the franchisor is a bad franchisor. It just means one of their policies didn't fit under the SBA guideline program. Like they take the money upfront and then get paid to franchisee. There's all different rules that these people had to stay under for SBA. That's disappearing, so lenders are gonna have to take their time.

Dan Pace (First Financial): 26:27

We're already prepared for it. I mean, I've gotten so many FDDs in to look at. We started a whole new filing system in our share files for FDDs, but the Mr Franchisor has to be aware of that and, other than that, it's them following their game plan. This is how you guys have it set up. We're still relying. The reason most lenders like franchises if you're really into lending is because we put a lot of faith in the franchisors. You're buying a franchise why? Because the franchiseeer or is there to assist you, right, lance? I mean that's what you're paying that money for. They have a marketing department. They have all different kinds of departments to help you grow your brand, and that's just the way it is right now and we enjoy that and other places. Just don't understand it.

Lance Hood (FranPro): 27:27

That makes sense. I just want to check in with you really quick. How much time do we have?

Dan Pace (First Financial): 27:35

I have as much time as you need. Ok, because, yeah, these are great answers and I just had a few more questions, that's fine, I can't go on a little bit, but the questions you're asking have a lot of explanations to them yeah, this is great, this is great, my pleasure.

Lance Hood (FranPro): 27:57

So what are some big mistakes that you see that maybe franchiseeers do that hold their business back, like if they would make some changes, their business could take off OK.

Dan Pace (First Financial): 28:14

I hate to speak for the franchiseeers, but I can tell you on the lender side of things that we don't like. One of my pet peeves is that you're selling multi-territories to people that really don't qualify for a multi-territory deal. Second on that multi-territory is they're not giving them enough time to open up location 2 from location 1 or location 2 from location 3 or whatever it may be. I see that happening a lot. Now I'm not telling franchiseeers not to sell. They call them two packs, three packs, five packs. I don't have any issues with that. Everybody's in business to make money. Where I have the issue is if the client physically is not going to qualify to be able to open two or three of these locations. And then it really comes back to that other example of how long does my franchisee have to open up the next.

Dan Pace (First Financial): 29:20

Banks are banks, lenders are lenders. If I loan you $400, I'm just picking a number $400,000 to open up location 1, or $500 or a million, whatever it may be, and you get it up and running, takes you six, seven months to get it built out, done and you're ready to go. And You're just barely making money now because you just opened and four months down the road you're still having. You're not cash flow positive yet. Now you have to go out and open up a second location. We're not going to want to loan you the money. Why would we loan you money? Why would you open up a second location when the first one isn't cash flow positive? Yet If the first one is cash flow positive, by all means I don't care if it's three months or six months or 12 months. We'll look at doing the second one. I want to do every one of them, but the franchisor has to understand that it comes down to the people being able to qualify and what lending practices are like out there. No one's going to loan somebody on a second location if the first location isn't at least breaking even. That's a big thing. That I see.

Dan Pace (First Financial): 30:46

The other thing that and I don't have a lot of problems with franchisors because we work with so many of them I can really tell them how I feel. Hey, I don't think this, you should be doing this. It doesn't mean they listen, but I say it. I think the biggest problem too is that they accept people that probably aren't the right candidate for that individual franchise. They don't qualify, they're not going to get a loan and you still took them in as a franchise. I don't see that as much, because most of the groups that we work with are pretty, very, very good, stable companies with good people working for them. There's always one guy that slips in and you give him a loan and he wants a loan and he's paid his franchise fee. He comes to us and we can't help him.

Dan Pace (First Financial): 31:48

That's something that franchisors have to be careful for and they need to spend more time, in my opinion, vetting their clients. Let's say you get a client, you refer them over to whatever franchise he's interested in. They have their own franchise director. They need to take the time to vet the client and have them get qualified with them before they award them a territory and make sure that they have the financial needs, if they don't get a loan, that they'd still be able to open and not be undercapitalized. That's the effort. A lot of the franchisors are really good at that.

Dan Pace (First Financial): 32:35

Now I've seen this industry change immensely over the years, where guys would just sell franchises to anybody many, many years ago to where the good franchise groups are the ones that are out there that are really vetting their clients, their potential franchises, and they're out there to make sure that they're going to be successful. That's what a franchise is. Remember that FDD has to state everything. Just because the director is gone, the FDDs are still have to be filed every year. The worst case for a franchise or is to have to put that he's got territories that closed. It's a reflection on them and a reflection for banks when they look at them to be able to finance them. They can walk away.

Lance Hood (FranPro): 33:30

Yeah, I know that the franchisors say we don't want to tie up the territories and this and that, but I've always felt that some of those progressive opening plans were just a little aggressive because of the startup is when you're the weakest and you're learning. Just putting a little bit more slack in there would help everybody. It would help the franchise or in the franchise, people do what they feel is right, but I think they would have greater success.

Dan Pace (First Financial): 34:00

They know their model, Lance, and they feel, because they probably accomplished it themselves, that everybody can. But it really depends on the demographic area you are. Let's be honest. You can open up one and it's a cash flow cow from the day one you open it. Then you go to another one, but the area is not as good as the other one was and this one doesn't support it. It's a tough decision for franchisors, but it all gets back to exactly what I said Make sure they're financially strong enough to be able to open up three days. If they can't get a loan, Maybe they have money in their retirement account or maybe they got a lot of stocks and bonds. If it's $250,000 to open up each project, make sure they qualify for it. Make sure they got $750,000 so you know they can open them up, Instead of saying down the road oh, maybe we can get you this loan or maybe you can get a lease. That's not how it should be done. You shouldn't buy a business on maybe.

Lance Hood (FranPro): 35:00

Right. Well, what have you noticed about franchise companies? This can be the company itself as an opportunity or the company as the product to the consumer. What have you noticed about these companies, on the ones that really took off and succeed? What is it about them?

Dan Pace (First Financial): 35:19

Another good question. If you want my absolute truth, I think they have better marketing departments and they're out there and they're pushing the products out in front of the coaches, the consultants. They're advertising and publications, social media, and they're just getting more exposure and you're seeing a lot of I guess I would say the word repeat brands. Give me an example when I first started in this, there was one mosquito company out there. There's probably 27 different franchises now that are pest control companies. So you're seeing somebody that had a good product and a good concept on the franchise world and it's copycat it, which is fine. I mean, it's business is business. I'm still doing them all, but I see that being that factor and once again, it's a challenging scenario for people. It all comes down to finding that brand that's going to work for you. I think that makes sense.

Lance Hood (FranPro): 36:33

Yeah.

Dan Pace (First Financial): 36:33

Yeah.

Lance Hood (FranPro): 36:35

Does Kynan mean retail وتانصIGHT? Is Kynan a fashion brand? I was going to say are there any things that you have noticed about? And we talk about item 19, and we talk about that stuff. I know that that's important and I know that some companies still don't put a good item 19 in there or not at all. What's your recommendations with that? Because I think that as somebody looks to buy it, that is really important to them to have an understanding of what it could do. What's your suggestions from looking at all these FDDs over the years?

Dan Pace (First Financial): 37:14

This is a little bit now. Remember this is me, this is my bank, this is a lot of lenders. We don't really put as much effort into the item 19 as the potential franchisee does. We're looking at the product as a whole. We're looking at the franchise as a whole. Cash revenues are great. Don't get me wrong. It's nice to see that these franchises I was on a presentation today where that's what they put up Remember what I got back to a little bit ago. It's not always about the money. It's about the structure of the franchise and the growth of the franchise. The item 19 is based off how much money you can make.

Dan Pace (First Financial): 38:03

I think the reason some of the franchisors there's quite a few that don't have an item 19 is because they don't have that information to really publicize yet. They don't know exactly what all their franchisees did. Because just because you're a franchisee doesn't mean that you have to submit your financials to your franchise or to be published. Now, yes, you have to give them a report because they're taking a percentage of your business, whatever it may be 5%, 6%. The guys I talked to today were 8.5%. That they take of the revenue, of the gross revenues A lot of the smaller franchises, especially your new ones, they're not going to have an item 19. The only thing they could really post is if they have their own operating business, which is something I like to see.

Dan Pace (First Financial): 38:59

On the franchise side, I'm a firm believer that every franchise had at least one location open of their own. They can justify the numbers from that, but a lot don't. If they don't, then we go back and I go back and I look at who's running this, who is the founder of it, who's the president? Where did they come from? Is this their background? If it is, then it's understandable. You got to look through all those things. But the item 19 is not going to deter most lenders who do franchise business. If it's not in there, it might deter a franchisee or it might deter a coach from representing and showing the business, because you guys like that. There's not a convention or a franchise meeting that I don't go to. When we're doing speaking engagements and so is the Zores that the first thing they bring up is their item 19. I'm used to that. I do think it's a good thing for the franchisee to see it. For me I can look at it and say yes, but I'm really more concerned about the client, to be honest with you.

Lance Hood (FranPro): 40:30

What advice would you then have for brokers and consultants who are working with clients and they're bringing them in for funding? What are some things you see that maybe you suggest they do more of, or some things you've seen that works really well? What could we share that would really help the brokers out?

Dan Pace (First Financial): 40:50

There's a few things there. On the broker side, I look at everything as urgency. I always have and I use a scenario. You're probably too young to understand this, but way back when I had my franchises, we used to use a product called a lead box. We didn't have social media that, we didn't have all this stuff where you can click and have advice. We used to have these things called lead boxes and you went a free two-week membership to my fitness center. You strategically placed these all over stores. Even to this day, karate studios still use these.

Dan Pace (First Financial): 41:34

Someone fills out the lead, puts their name, phone number. There was no email addresses back. I'm really telling all of my I don't like it. We would go out, my sales staff pick up the leads, go back and we would call the people and make appointments. Day one, if you got the leads, everybody was excited, would show up, come in and you would try to sell them a gym membership. If not, they got two weeks free to work out. Day two, they remembered it. Day three, they didn't even remember filling it out. Getting over day three, you might as well just throw the lead out because they're not going to remember. They just did it while they were standing in line.

Dan Pace (First Financial): 42:20

I use that same scenario and synopsis when I talk to a coach. I said if they mentioned financing to you, when they're interested, you should automatically send them over to me and let me talk to them, or to my staff, the care and Cindy, you name it. There's multiple people here. Let us talk to them and keep the excitement going, because the longer you let that person set around, they're gone. They're going to call another coach and another coach, or they're going to call their own franchise, or they're going to go online to all these sites and I'm not plugging any of those Look for businesses. It's keeping them engulfed in what we're trying to do. When I talk to them about financing, now they're really in.

Dan Pace (First Financial): 43:13

That's when that pre-claw comes in, because I explain it to people. Let's get you pre-approved. It costs you no money. We're not pulling your credit. We're not doing any of that. We show them how to do everything themselves and find out how much we're willing to give you. And then you go back and engage with your consultant and go find something. That's the fastest way. That's the people that do it that way. The consultants that refer me to people in my office, those are the ones that are closing 10, 15 loans a year, believe it or not, because they're staying on top of these people and we're staying on top of them.

Dan Pace (First Financial): 44:00

That's the biggest thing I can say to coaches and, realistically, even people that may not be interested in financing might be. Once you get to the right thing, once they find a franchise, we don't need them to know what franchise they want yet. We just want to pre-qualify them and let you go do what you do best. I've already done what I do best by saying, okay, here's what we're going to give you, here's the terms. This is the money down, this is the interest rate. Go find what you need, get back the lands or whoever the person referred it to them to, and go find a business Once you find it. Now we re-engage again. Let's start really getting all the stuff together, be it a startup, be it a resale, whatever it may be. That's the key. Urgency brother is the key, best way to say it.

Lance Hood (FranPro): 45:00

Right, what would you recommend when somebody is working with a client could be a broker, could be a franchise, could be a consultant and the client wants to look at brands, wants to look at their brand, but they're just like, hey, I'm not going to talk to a bank until I know I'm going to do this for sure, or I know I have the brand I want. There's that fear or that hesitation where they're doing a pushback, but you know they need to qualify so that you know that you can actually find something they can afford. What do you recommend saying to people in that situation where they're getting some pushback from a client?

Dan Pace (First Financial): 45:41

I think the best thing. A lot of you guys have forms that you use. That form is fine. If someone doesn't want to disclose anything to you, that's a tough scenario because you're talking to somebody who you don't even know is going to qualify for the things that you're going to spend a month at showing them. It's like the real estate philosophy. How many real estate agents do you know that will go out and show people homes unless they were pre-qualified already? That's the first thing they say. Why would you want to go look at a million dollar home if you can only afford to have a million dollar home? The people that are leery of that. I would at least have a series of questions together as the consultant that you can ask them. That's fine.

Dan Pace (First Financial): 46:41

You don't have to speak to my finance group now, but can you give me a little information? Is your credit okay? Do you have that amount of liquidity available? What's your net worth? People know the answers to that. Come on. Everybody knows how much money they have in the bank. Everybody has an estimate of what their net worth is. They know if they pay their bills on time. Those are basic questions that you could ask. It would get you through until they really want to talk to somebody about financing One of my favorite.

Dan Pace (First Financial): 47:20

When I talk to people, one of the things I ask I go if you ever claim bankruptcy or default it on a government loan, because if I hear that I know I'm going to have issues. I eliminate some of that off the top, but you don't want to ask them too many questions. This is, in my opinion, in dealing with franchise orders and coaches for 25 years, anybody who really doesn't want to disclose what they have probably is not going to move forward anyhow. Every couple of months they're going to call you or they're already working with three or four other consultants and don't even tell you, because I see that when they do come to me. Well, this guy showed me this and this guy showed me that it's not a comfortable position for me to be in.

Dan Pace (First Financial): 48:23

But I think it's getting that general sense of information and if you don't have a form, you should create a form and if you need help, I have forms. You could even use my forms. We call it a questionnaire. It gives you everything on the questionnaire. You know are you married, what was your income for 2022? Just basic information that people I would think would know that you want to know about and I'm not saying this is done on your first call with them, because I know consultants have multiple calls, but I would say by call two you might want to talk about the financing arena and say is this project something that you might need to acquire financing for? And if they say yes, that's when you would say OK, could I introduce you to one of my funding partners and there's no charge, and you could talk to them and they can explain how all that process works. If they say no, say well, would you mind answering a couple financial questions for me so I would have a better idea of what to find you. How do you find somebody?

Lance Hood (FranPro): 49:39

of French, I said, if you don't know what they can afford, right, yeah it's crazy, although people, I think, just have this fear of if I do whatever this thing is, I'm going to feel obligated and sucked into doing something I don't want to do. So they put these walls up. But it doesn't totally make sense, because you're trying to help them and you can't totally help them when they do that.

Dan Pace (First Financial): 50:04

Now you have to put them at ease, you have to explain, listen, it's just general questions. They don't even have to put their name on it for you, you know. I mean, it's just what we're asking or verbally commit to it. I do find, even when you guys do that, what you get from a client and what I finally get from a client, are usually definitely different.

Dan Pace (First Financial): 50:31

They're going to tell you some things, but they have to tell me everything, or my staff obviously. When I say it, it's not even close to what they told you. Very few of them are. In most cases it's a lot more than what they've told you. Network wise, liquidity wise, it's very few, is it less? Every once in a while you get a guy who likes to make stuff up, but once again that's all part of that prequel.

Dan Pace (First Financial): 51:00

But I understand your misery People. To me I tell them listen, if you don't want it, we have a prequalification that costs you no money. If you're ready to move forward, we'd be more than glad to share it, send it to you when you can upload your information. I do not disclose anybody's financial information to you. If you refer the client or to the franchise or, the only thing I go to you guys is basically and say, ok, he's preapproved, he's got his letter of interest. You might want to reach out to him and that's it. And that's all you guys really need to know at that point. That's the way to approach it, but it's it. There's no easy answer for you guys. For me there is. If you're not ready, then when you're ready, call me back and we'll email it to you.

Lance Hood (FranPro): 51:53

That makes sense. Last question Sure, any other red flags that you think that you know broke consultants, brokers, franchise or should be aware of when working with a client like this is a client that I don't know something's telling me that they might have a challenge, they might have low credit, they might not be the kind of person that's going to follow through on a loan. You're like, when this happens rarely do I see a loan actually complete. These are just not maybe action items, but just things to be aware of and conscious of.

Dan Pace (First Financial): 52:25

Gotcha. I think credit is probably one of the biggest ones, lance. A lot of people really don't know their credit. I know that sounds strange. I know mine because it dames me if something's happening with my credit. But not everybody out there knows what their credit is and not everybody understands what good credit and bad credit is. Okay, just because they see a score doesn't mean that it's good credit, doesn't mean it's bad credit. They don't know what it means. There's a ratio out there between good and bad credit.

Dan Pace (First Financial): 53:01

One of the things the credit thing I bring up the most is because we started a credit restoration company called Genie. One of my best buddies runs it. He's excellent at it because we get a lot of people and once they send us their credit report, we see that they're not good credit and we bring them over and try to get that corrected so we can move forward with their loan and it's been a very successful program. That's the biggest thing that the client doesn't know and you guys don't know. It's a hit or miss. Somebody could have a lot of money and have terrible credit. You know, or they got divorced and something happened in the divorce, or they were laid on their mortgage payments. There's all kinds of things, but credit. That's one of the facets of getting a loan that we have no control over Virtually none. It states what they have to have and if it isn't that, there's nothing we can do. You cannot. What I have done I'm most of my bigger ticket loans. I do a merger. So if I have a husband and wife and the husband is 725 and the wife is 610, which is not good compared to good we merge them together and divide it by two and as long as we come up with 680 or above, we're pretty much good to go.

Dan Pace (First Financial): 54:31

Not all lending institutions do that. I spoke to a group of guys today, three partners. One partner co-signed for his son on a car and the son never made the payments on time, so his credit went from an 800 down to a 510, which is not good at all. We took the other partners that were in the 800 range, blended them together and said, okay, we're good to go. In the meantime he's working with our credit restoration department trying to get some of that stuff taken care of.

Dan Pace (First Financial): 55:07

But credit is a killer. We cannot change it. I can figure out a way to somebody to get a gift letter if they're a little short on the cash injection. I can figure out how to work around collateral if I need it. I can figure out how to work around a franchise that might not be where it should be, but when it comes down to that credit, there's not a lending institution in the country that can do anything. You just have to dust that, send in amount to credit. It's called credit genie because he is a genie, I have to admit. Shane does a fantastic job and that's why we also brought in my franchise CPA, lance, to be honest with you, because people can't even figure out how to do set up their corporation or how to get their licenses. So we have that group with inside us which is all one umbrella where they help people do that.

Dan Pace (First Financial): 56:05

So but to get back to your question credit is it, credit is everything. That's one thing I always ask Well, how was your personal credit? Have you ever claimed bankruptcy? Have you ever defaulted on child support? You miss your mom? Oh, no, no, no, no, no. Okay, we're good. Oh yeah, I had a short sale right there. It's a flag. I know that doesn't mean we still can't do the loan, but we know they have it. That's when we start working that process. Okay, we need to put you with our credit people. Let's talk. Why don't you talk to them and see what can be done? And you keep moving along and moving along and then eventually, two months, three months at max, we get an email from our credit department that says they're good to go Start moving forward with their loan. I get back to you and say their credit's good, now let's go ahead and move forward. Boom, it's systematic.

Lance Hood (FranPro): 56:59

Right, that makes sense as you were talking. I just got this panic in the back of my wife Cosine for one of my daughters. I see she's made all her payments on time.

Dan Pace (First Financial): 57:15

Because you're just a guarantor. I see it happen quite frequently. That woman just recently. She cosigned for her son's home and he didn't make his mortgage payments. So their credit gets destroyed and you're a guarantor On that type of stuff. It's different when you're a guarantor on an SBA loan that's off the balance sheet accounting. What that means is, even though you're guaranteeing it, it never appears on your personal credit because it's not a personal loan to you, like a mortgage is, or credit card or your car. It's a loan to your business entity that you set up. That's the big, big difference. So, yeah, you should check it. I see it happen a lot it does.

Dan Pace (First Financial): 58:07

Or people default on their student loans and the parents cosigned for their student loans and they fell behind on student loan payments. That's a big effect when it comes to SBA, because their student loans are government back loans, just like Fannie Mae, freddie Mac mortgages. Those are all government back loans. If you were laid on a government loan, no bank's ever going to give you another government loan because the SBA won't. Let us do it, obviously. So I'm sure you're okay, though Don't panic.

Lance Hood (FranPro): 58:46

Well, I appreciate you joining me on this call today, dan. You're insightful and wonderful as always. Go to the a link next this video, and you can go to that and check out First Financial and all the amazing resources they have to help you. I've worked with them, they're great and just thanks again for joining us.

Dan Pace (First Financial): 59:13

It's always a pleasure, lance. Thank you, and I look forward to our next one.