Funding for Business Startups

Lance Hood (FranPro) 0:09

Welcome , everybody . Happy to have you here today to listen to Sam Phelps of Tenant Financial Group . He is the Director of Development . Sam , welcome to the call . Happy to be here , lance , thanks for having me , can you briefly introduce yourself and give everybody a little bit on your background ?

Sam Phelps (Tenet) 0:28

Sure , absolutely . I guess you would say I'm a recovery banker . I've been around small business for my entire career but just most recently moved over to Tenant last year in the summer . For those that don't know Tenant , we are a financial consulting firm . We specialize in helping folks get to their funding needs and then we have variety products through the ROBS or the Rollover Business startup , as well as helping people get SBA funding , equipment and leasing funding and all that good stuff that gets rolled into one in the franchise world .

Lance Hood (FranPro) 1:01

My background just basically been around small businesses been on the other side of the table where I got to react and work with people like Tenant and the franchise orders in this space .

Sam Phelps (Tenet) 1:13

But it's fun being on this side where you have a little more freedom and are able to just help people get funded and get help . That dreams come true .

Lance Hood (FranPro) 1:23

Well , and there's different kinds of loans . Like you said , you had the ROBS , which is your Rollover . So some people they don't have to , they can't , maybe they don't want a loan or they can't get a loan , but they can access their funds and you help them with that and that's its own process . People we were talking about before this that some people go and they do all their own research online and get information on a website when they actually need to just come to you and have you tell them the laws and rules and how to do it . So it's great to have you on this call . Can you explain a little bit about how Tenant is different ?

Sam Phelps (Tenet) 1:59

Absolutely . I think one of the things we were talking about before we got started is , first and foremost , we're a consulting firm . Some other businesses in just the whole funding space , not just limited to franchising . It's all about getting the deal to sale . While that's important , we want to make sure that we are generating returns for our shareholders returns for that'll keep everybody paid and going forward . The most important thing is our client , and when you come to Tenant Financial , it starts with a conversation , as you alluded to , and I thought of great .

Sam Phelps (Tenet) 2:38

Just the introduction at Lance is each person is different . There's some people that absolutely they're not interested in a debt product . They want to be as adverse to taking on debt as possible and maybe based on their situation . So we do have a product for that . That's the the rollovers business startup that allows you to access your retirement funds . But we also have great folks that help us and great funding partners that help you get the deal done .

Sam Phelps (Tenet) 3:06

If you want to explore the debt side of things , that ranges from SBA loans to individual signature loans , to also equipment funding resources , whether that's leasing or a loan . So really it's kind of like going into . You know you're into a sushi place and you pick out the different roles you want . Sometimes you have that person that wants that's my , that's what I'm going to get , and but then you know you've got the people that want a little variety of things on their plate and so a lot of times that's what we see is it's a combination of the two . Maybe they use their retirement as a down payment for an SBA loan and allows them to stretch that dollar further for some of the bigger projects . But regardless , if you come to us it starts with a conversation . You just know you're going to get something that fits your risk . Tolerance helps you achieve your goals , but , more importantly , you're going to get all the resources and communications so you can make that decision that's best for you .

Lance Hood (FranPro) 4:11

Right , well , excellent , well , can you tell us , maybe , what some of the pain points and challenges are that the customers experience and that you help them with ?

Sam Phelps (Tenet) 4:23

Sure , I think sometimes it's just getting started . You know they come from a corporate background or this is a life-changing moment . This will be their first business , startup or business loan or just in general the franchising world is a great , great resource for that , because you have a proven model that has data .

Sam Phelps (Tenet) 4:47

It has information that allows you to seamlessly take whatever trades you've added to your tool belt through the years and just slide in on something that makes it your own . Where we come in and try to alleviate the stress , alleviate those things that keep you up at night , is to go over what you're trying to accomplish and again , just tailor-made a funding package that matches you . So ask questions . I always encourage folks . There's no really a dumb question If you haven't asked it , someone may have asked it and we have a good answer for you or if it's something new . We're learning every day as we have all these new franchises , we work with all these different types of projects , and so it's always good to be able to make sure we get those things checked off your list . And the most important thing is to make sure that you're in a position to be successful when you start your business .

Lance Hood (FranPro) 5:47

And what would be a couple of stories ? You know , there's always companies that when you help them whether it's the franchise or like a whole system or something where you help them launch into something bigger I mean you've had a dramatic impact into a company's growth . Do you have any stories of that ?

Sam Phelps (Tenet) 6:06

Sure , sure , most recently , one of the franchisors we work with and I think it's a great kind of talking point because we deal with a lot of , you know , the startup side , the new franchises , their first go-round . But what happens when you want to go to unit number two , unit number three , unit number four ? I think , talking through that , you know with our customers as well as the franchise or what the expectations are to be successful . And the best thing is is what hurdles are you going to have to hit ? And a lot of it comes down to is having a plan to show that cash flow .

Sam Phelps (Tenet) 6:42

Because guess what , if things are going and you're performing how you say you were going to on your proformas , that second one's a whole lot more fun to go back and make a request to that banker because they're chomping at the bit to help you grow there . And so I think that's one of the things we try to concentrate on with our customers is what's your ultimate goal here ? And we get a lot of the serial entrepreneurs to where it's . You know , I have the first one , but I'm really looking to grow to here , to here , to here in the next couple of years . So we try to answer the how on that . How do you get to that point ?

Lance Hood (FranPro) 7:20

Well , what would be like the process of working with your company ?

Sam Phelps (Tenet) 7:27

The first step it would be to have a call one of our sales consultants . They are very experienced in the industry , work with a lot of different franchises , so you're not going to have something they probably haven't seen . So we start with introductory call . They're going to go through our products , similar to what we just discussed . They're going to hit the highs and lows , tell you what risks , walk you through the framework of how that would work for your project and then engage with us .

Sam Phelps (Tenet) 7:56

From there , One of our packages is going to take over . They're going to get you set up to submit all your information for a full package to the bank . From there , the bank will do their review and usually you would work with our package . Their goal is to get your package submitted to the bank . We have a pre-qualification process that will let you know that you're hitting the metrics that the bank would like to see . Once the bank does their cursory review , they will go to a full underwrite on this .

Sam Phelps (Tenet) 8:28

This is where they might ask you some questions that are particular to your project

Streamlining the Business Loan Process

Sam Phelps (Tenet) 8:32

. A lot of the project and how you outline your business plan , your projections those types of things are going to be driven from the FDD that the franchise war gives you , but now here's an opportunity for the bank to make sure they're understanding your project . One of the things that we do see a lot of times is just making sure you have enough working capital to get you through that startup phase , and so here's an opportunity for working with us to make sure that we have everything set up so you can be successful From there . It's usually closing , and closing is sometimes a little bit of a challenge because that's all the things that have to be done before your business is operational , whether that's executing a lease , getting their life insurance , all that paperwork filed with the state .

Sam Phelps (Tenet) 9:23

One of the things we do as part of our ROBS program is you will get the white glove treatment start to finish , as far as filing your articles of the corporation , your bylaws , your minutes , all those things you have to do . We help you take care of that and from there you close your loan and then hopefully you're off and running on your business and everything's good .

Lance Hood (FranPro) 9:46

Well , how long does that process typically take ?

Sam Phelps (Tenet) 9:50

You know it's a ROBS program . It takes about four to five weeks to fully get all your corporate documents filed , get the money transferred from your existing retirement plan into your new plan that will invest into your corporation . The SBA can range . If it's a smaller loan , you know , 150 and below it usually takes 30 to 45 days , whereas you get into the projects beyond that a lot of that's dependent on where you are with your landlord , where you are if you've got a construction piece to that , and so that can take up to 75 days plus . And generally when those get a little bit elongated on the timeline there's a specific reason that we know about the franchise or knows about the bank knows about . But we try to get ahead of those things . I always tell folks when they're going into it get your life insurance started early , because that's a process in itself , and then if you haven't had conversations with your landlord or your contractor , let's get that rolling pretty quickly .

Lance Hood (FranPro) 10:58

Yeah , because the bank , when they go into underwriting stuff , they're going to make sure that you have all the things needed to open this and operate it successfully and be able to go on day one . So they don't want to give you money and then you can't get a permit . So these hassles that drag the loan out are things that you probably want to get on earlier , and a great lending company will just walk you through that in advance . So you definitely want to listen and follow their checklists and that will shortcut the process for you for sure .

Sam Phelps (Tenet) 11:29

I think you hit the nail on the head . Get ahead of it , because it's going to come up later . And that's why banks ask for it before you get to sign your name on the dotted line . And by having that and what we've seen sometimes in the past couple of years with cities , if they have a change to your plans or that project gets tweaked . It's better to address that up front instead of having to scramble for it later .

Lance Hood (FranPro) 11:52

And I guess we're a little ahead of it . But my next question was what can people do to speed up this process or shortcut some things , Because there are some things that you have to make it happen at the shortest time frame possible .

Sam Phelps (Tenet) 12:08

Absolutely .

Sam Phelps (Tenet) 12:09

We try to get ahead of that with you . So one of the things my package is going to ask you for is you know , of course , your documentation . That includes your tax returns three years for you personally and any businesses that you own , 20% or more . Also , you know life insurance , life insurance , life insurance . If we talk to you and say , hey , this is going to be a loan that will require it , go ahead and get that started and what that allows you to do is get into the queue and if you need to adjust that amount , it's much easier to adjust it after you've had your you know , medical review , those types of things .

Sam Phelps (Tenet) 12:44

But , like as you alluded to Lance , once you get into a construction side of that , that's where things can get interesting . It's very common to have that in this world and you know some of these concepts are really cool .

Sam Phelps (Tenet) 12:58

But you know you go into a new city they're going to have comments and , like you said , in order to start the construction process you have to have those permits ready to be pulled or issued . And so get that stuff to your contractor , get that stuff to the city , and that way , if you're in the middle of underwriting and something changes , you can quickly make a change to that number or on that project . Then you're not having to , you know , do things two or three times . And so , absolutely what Lance said you know , get ahead of those things and we'll help you there every step of the way .

Communication and Life Insurance in Franchising

Lance Hood (FranPro) 13:32

It's funny because when you bring up life insurance , people like I need life insurance and like , yeah , the bank wants their money .

Sam Phelps (Tenet) 13:43

When I was coming up as a banker , I had a older gentleman that had been in banking for a long time and his comment always was it's a good time to assess with your family .

Sam Phelps (Tenet) 13:54

you know where your assets are where your estate is and what would happen if something were to happen , and I think for the cost of most real life insurance for most people it's a great insurance policy for your family and that way , if something were to happen , there's a lot less stress and you can not necessarily have to make a decision where you're not in control . If you do have that policy and it takes care of you , know your loan , that allows your family to make the best decision for them with your business going forward .

Lance Hood (FranPro) 14:30

Well , what are some common mistakes that you see ? This can be borrowers , but it can also be franchise ores . You know what are some of the biggest mistakes you kind of see happening out there ?

Sam Phelps (Tenet) 14:45

I think it comes down to communication and that's a very broad thing to say .

Lance Hood (FranPro) 14:52

but don't be afraid to ask a question .

Sam Phelps (Tenet) 14:54

If it's something that's very high on your list , the good franchise ores and I would say most franchise ores are going to make sure that they have everything answered for you , because it goes both ways in this world . They want you to be successful because you help the franchise grow but at the same time , if it's something that you're hesitating on , it's better to talk about it at the beginning .

Sam Phelps (Tenet) 15:19

You would hate to get something signed and have some remorse there and wish you'd ask questions .

Sam Phelps (Tenet) 15:25

But I think we don't necessarily see it . But I think when folks ask me , I said you need to go to your franchise representative and just talk to it , through it with them , because I think once you talk through it you're going to realize oh , I've got all these resources I can use , and so I think you need to use and so communicate , utilize their resources . And the same with the franchise ores , the ones that we work with routinely . They're routinely picking our brains for , hey , what can we do here , what can we do there ? And we try to be transparent in what we're seeing in the market , what the banks are asking for , what the funding options , how they are changing . So everybody has the best interest to make sure that they're most up to date what's going on in the market , what's going on in the world of funding . Because , as we've seen , particularly in this past year , it's just , it changes pretty quickly and the ones that communicate the most have been the most beneficial in my book .

Lance Hood (FranPro) 16:27

What are some examples of that communication that can be improved ?

Sam Phelps (Tenet) 16:31

I think One thing we discuss with our franchise oars is , you know , the funding questions is get to us quickly and get to us at the beginning if there's something that's kind of in that gray area . What we have noticed that bank or , excuse me , that franchise oars have really done after we've been in this rising rate environment this past year , is make sure they're current with things . They are very good franchise oars and their processes .

Sam Phelps (Tenet) 17:02

but you know , sometimes you need us to step in and say hey here's how the funding package is going to look like , so again it's just getting to things early , making sure to answer questions . But the good ones do that , and then when they realize there's something they need to address , boy , did they jump on it fast . It's good to see .

Lance Hood (FranPro) 17:24

Well , are there any things that people can do to create even better results ? That is a good question . This could be borrowers , it could be franchise oars , it could be brokers .

Sam Phelps (Tenet) 17:38

I think when it comes down to getting into the franchise space , it's realized that it's kind of like a marriage You're in this together . It works both ways . So if it's something that's going to be a newer industry for you , make sure you understand what goes into that . Some folks come into a situation think it can be a passive type of investment , and I will tell you nine times out of 10 , the way these are set up , the success is a lot of times driven by how active you are in the business and so being present , being there to handle the day to

Advice for Franchise Success

Sam Phelps (Tenet) 18:22

day . But also , if it's a situation where you're purchasing an existing franchise or an existing business , ask the questions , make sure you understand really what it takes to be successful and so , where that kind of comes into play too with the new businesses , a lot of what we see franchise oars do that is a great resource is puts you in touch with other franchisees .

Sam Phelps (Tenet) 18:46

Don't be afraid to ask them hey , what would you have done differently when you started it ? And they're going to have a list for you , and so I think that's really what I see . That's very great to see is you can , in this space and in this world , as you can learn from others and sometimes avoid those mistakes by listening to others that have become successful .

Lance Hood (FranPro) 19:10

Well , Sam , that's incredible . I wanted to thank for being a resource in our in dustry . here . https://Franpro . vip/GoTenet

Sam Phelps (Tenet) 19:39

No , it was a pleasure . It's always fun to talk about these things and we're here as a resource and really appreciate you having me on today and thank you , you bet .