Episode 31: Franchise Funding Secrets — How to Start a Franchise Without Huge Debt

Pam Currie
Thanks for tuning into another episode of the Franchise Sisters Franchise Business Radio Show powered by our company Franchise Intellect, insider knowledge for selecting and investing in a franchise. I’m Pam Curry, your host for today’s episode, and I’d like to welcome our guest, Wendy Skimmer with Benetrends Financial. Wendy, welcome to the show.

Wendy Skemer
Thank you so much, Pam. This is so overdue. So I feel very, very fortunate to be here today. Thank you. Great to see you.

Pam Currie
I create.

Well, it is great to see you as well. It’s been way too long. We’ve talked about making this happen and I’m excited that we have, I guess another little tip that we were just talking about how long we have been in this business world together. Gosh, the years go by, aren’t we lucky us?

Wendy Skemer
I know, I can’t believe where we are in the quarter as it is. Halfway through the quarter.

Pam Currie
I know you and me both, craziness. Well, Wendy, I’d like to go ahead and give our listeners a little bit of background on you. Wendy, you actually bring more than 35 years of experience in the financial industry. Joining Benetrends in May of 2013, I didn’t know that. Prior to your position at Benetrends, you were a senior manager of financing strategies at Direct Connect Ventures.

responsible for developing new business plans and assisting clients with SBA lending programs. In addition to your position at DCV, your career path took you to Japan. That was interesting, where you worked in accounting, merchandising and development for the GAP. Definitely shopped there.

Wendy Skemer
You

Pam Currie
Obviously your foundation for this career that you’ve created for yourself is through your Bachelor of Science degree in finance from the State of University of New York in Buffalo, New York and your master’s degree in accounting from Golden Gate University in San Francisco, California, which is where you currently reside, right?

Wendy Skemer
Correct. I am in Southern California now. My company, Openertrends, is based in Pennsylvania. So I always say I know cold.

Pam Currie
Whoop whoop whoop

Pam Currie
I getcha, I getcha. Well, I guess it’s safe to say to our listeners that you are a wealth of knowledge and really looking forward to chatting with you about identifying a wise funding strategy when you’re thinking about investing in a franchise. So why don’t we go ahead and just kind of kick it off. Would you please, let’s just kind of state the obvious. Starting a business requires capital.

and most of us don’t have a rich uncle. So how can Benitrenz help those that don’t have the rich uncle or father?

Wendy Skemer
Mm-hmm.

Wendy Skemer
So our job here at BenetransPam is to sit down and really understand everybody’s unique situation. Our specialties might not necessarily be what that client needs. So the goal on that first initial call is education, both ways. I want to learn what the client’s needs are, what their situation is, and I want to explain to them all the different ways there are to fund your business. I always will look at ways to reduce debt on that journey.

but I can’t help them unless I really understand what the composition of their financial position is. Are they working? Does it make sense to look at a small business loan? Would they be pre-qualified? Or should we look at potentially using retirement funds without tax or penalty? So it’s really everybody’s situation is unique. It’s our job at Benetrans to customize a plan with that client to help them achieve their goals of business ownership.

Pam Currie
That’s awesome. So like you said, it’s a custom plan that you put together for your clients. What type of financial services does Benetrends even offer?

Wendy Skemer
So it’s surprising to a lot of folks that we are not a bank. We are a full service retirement planning company. We were founded in 1983 by the Arista tax attorney, Len Fisher, who pioneered this amazing Rob’s program. So what we do at Benetrends primarily is help folks utilize eligible qualified retirement funds for their business opportunity to live their dream.

without paying any tax or penalty. However, not everybody finds themselves in a situation where that could be the solution. Maybe they’re continuing to work and they’re doing something in semi-absentee, or maybe they just didn’t participate in a retirement plan. That’s okay. We also broker small business loans. So we work with a pool of lenders. I always want to highlight it’s really important that I’m not a lender. So it’s an easy place to discuss.

getting an SB loan and then I’ll prep you and find you that appropriate lender. Kind of a matchmaking process.

Pam Currie
That makes sense. So could you kind of walk us through just some basic explanations on different approaches to funding business? You mentioned the retirement. I want to dive into that more deeply. You also mentioned SBA. Walk us through some common approaches to funding a franchise.

Wendy Skemer
You know, sometimes folks just don’t really understand what is an SBA loan? What is a HELOC? I see a lot of information on social media or LinkedIn or when I speak to peers, but I don’t really know what it is. Does the government actually lend me money? So just very high level, let me go through the different programs and technically what are they? So an SBA loan, whether you hear somebody talking about a 7A or a 504, when you’re talking about a small business loan,

you are working with a lender. The government is guaranteeing 75 to 95 % of that outstanding balance to the lender. Why is that good for you and myself and fellow folks who are looking to open up a business is it incentivizes the lender to lend you money. But a lot of folks are surprised when I let them know one, we’re not lending the money. The government’s not lending the money. The government approves you.

works with what’s referred to as an SBA preferred lender, and the actual bank is lending you the money. When you’re looking at a HELOC, it’s a home equity line of credit. A lot of folks, when I mention, have you thought about home equity as part of your funding solutions, a lot of folks will turn around right away and say, my gosh, I have the best rate on my first mortgage, I’m not touching it. And that’s fine, a HELOC doesn’t touch your first loan.

If you take the value of your home, go on Zillow, go on Redfin or whatever you use to assess real estate values, that’s a good idea of what the market value is of your house. Take 80 % and then you back out the money you owe to the bank or the credit union, whoever you hold your mortgage. That is usually a margin that you can borrow as a second mortgage. What I like about a HELOC

It’s use as you go. You guys, I speak from experience. I literally had a notary here getting my HELOC updated yesterday. Just saying. But when you’re looking at home equity, it’s really important if you can meet the criteria that should definitely be part of your financial strategy. At least understand what your options are. Other programs that we hear about, Pam, like term loans or borrowing against our portfolio.

Wendy Skemer
The specific situations could make them make sense. A term loan is a smaller term loan, but the biggest difference between that and an SBA loan, it’s no recourse. You don’t have to have money to put down, and we’ll talk about that. I know there’s further discussion today. And then lastly, I just want to highlight, what is a ROBS? If you’re wondering, how do I use my retirement funds? It gives you the ability to utilize an old 401k, a traditional IRA.

Maybe you just left the service and you have a TSP. You can use those funds without tax or penalty to invest in your business, just like you invest in mutual funds, stocks and bonds. It’s genius. And I want to highlight, and I know we’re going to talk about this as well, a combination of everything I just said might be your solution.

Pam Currie
Yeah, my gosh. OK, thank you for the overview. Excellent, by the way, and you’re right. think out of all of those different funding options, I would say the one that probably surprises most people is the fact what I can use my retirement money and not get penalties, but we’re going to dive into that before we dive into that, though. What financial profile like you mentioned? You know you look at the individuals financial composition. What are you looking for in someone?

to make these different loan options even a possibility or make them eligible for.

Wendy Skemer
You know, I think this is really important. This is the initial step I take with every client. Even if I have a consultant or a franchisor or a business owner sending me information about the client, I want to learn from that client from their mouth. I want to understand, do you have retirement funds? Because if I’m speaking to somebody who’s never invested in a retirement fund, they could care less about the Rob’s program, right? So I want to understand, are you employed? Tell me about your credit.

And build that trust, of course, it’s very important because I’m asking them their deep dark secrets. Then I go through kind of a checklist. If you’re employed, here are the options that I know are worth talking to you about. What’s your credit score? If I have somebody, Pam, that’s credit score is below a 690, right off the bat, I know that credit repair or better understanding how I get their credit over 700 is going to be part of that conversation if they need debt.

If they don’t have retirement funds, we’re talking about fixing that credit. So it’s kind of like a checklist. When it comes to the Rob’s program, if somebody’s not leaving their job and all their retirement funds are tied to their job and they’re not 55 or older, there’s no point in talking about that as well. So I go through, what’s your employment status? Maybe you’re not making money, but maybe you’re blessed and you have a spouse who is. That changes things too.

So I really need to understand that individual’s composition. And then I can go through and say, here are the options that I know can be viable for you and are applicable to you. Because if you like vanilla, could you care less that I have strawberry? I mean, who cares? Just saying.

Pam Currie
Good point. So what happens when you get the one that says, want the rainbow flavor? I want a combination of these funding options. What do do there?

Wendy Skemer
say you’re genius and go back and figure out how you can scale because that I believe is the beginning of the ability to really scale and build what folks refer to as legacies, generational wealth, empires as we spoke about today on a call with a couple in their early 30s mind you getting on this mentality that the only way we’re going to get to where we want to go and be happy in

you know, deep down with our real goals are to own our own business. People are realizing it sooner and sooner. But to answer your question, combination of funding, I will always look at that option. Now, in some cases, you know, I had a call earlier today and I don’t want to get too much into the weeds, but everything pointed to, they should just do a ROBS. They have the ability, they have the qualified eligible funds. It just makes perfect sense for their entire goal.

But when they are ready to come back for more, because they are thinking legacy generational wealth, they’re in a position where they can become their own bank. They don’t need a combination of funding. They can keep going back to their retirement funds to achieve their goals. They’re fortunate. They have a good amount of money put aside. Now, somebody who doesn’t might need that combination. If you’re looking at a small business loan,

Pam Currie
Thanks.

Wendy Skemer
and you’re light on your liquidity, you might absolutely need to utilize a Rob’s program or maybe take some home equity if you’re working to figure out how to achieve getting the SB loan. So sometimes it’s how can I help them scale? We have to use a combination in the long term. Other times it could be that’s the only way to achieve that first goal of business ownership.

And it does lay, in my opinion, a nice trajectory to grow from.

Pam Currie
I want to take us a little deeper on what you just said there with the combination. Say you have someone that they want to get the SBA loan like you said, but they don’t have enough liquidity to do the necessary cash injection. Let’s just say 20 to 30 % cash injection. They don’t have enough liquidity, but they do have that money in an eligible retirement account.

Can they use those retirement dollars for their liquidity to get the SBA loan? Would that be a blended approach and is that permitted?

Wendy Skemer
Absolutely Pam and I’m so glad you mentioned that because that is the majority of my clients to be fair They are I just had a client that put a deposit down on his business with his rollover Secured his territory Looking at you know moving forward but working through his SBA loan for the rest of his funding Here’s the beauty in this just to your point. Those lenders are looking at that liquidity

Pam Currie
So, bye.

Pam Currie
huh.

Wendy Skemer
So if you’re putting down 20 to 30 % of, and when we’re talking percentages, we’re talking of the total project size. So if you have somebody putting down 20 to 30 % of their project size for their franchise field, down payment on a business, that lender wants to see that they have another 10 % at least of that project in liquidity. While utilizing the Rob’s program, they can back off of their cash.

Pam Currie
next

Wendy Skemer
and really just utilize the robs for that down payment. Also, what if you have a client that’s not working and they’re looking at an SBA loan? They might need to use some of those robs dollars to build what we call an income reserve to show the lender, I’m not working, but I utilize my robs and I have a hundred thousand or whatever the number is in a payroll account, literally just for me to pay myself.

Now, a couple things. One is how wonderful is that for the client that they can start paying themselves, especially if they lost their job unexpectedly, which is rampant. And then the lender’s happy. It’s as if that candidate is employed because they guaranteed that salary. So now they can get their loans. So they’re a great hand in hand. We always say it’s peanut butter and jelly. They’re perfect together. I think I’m hungry. I know.

Pam Currie
you

Pam Currie
like that. We kind of got a food thing going here. Peanut butter jelly, ice cream, all of it. Kind of getting hungry, yeah. To do it, well that kind of talks a little bit more about the Rob’s program. mean, explain to me, Rob’s.

Wendy Skemer
think I need to eat.

Wendy Skemer
You got it. So I’ve been doing this a long time. As you mentioned, I’ve been here since 2013. What I’ve realized is when I present the Robs, most people don’t get it the first time. And I think it’s because I do my masters in accounting and I usually think of it just very technical instead of practical. So I’d like to give an example and I feel like it sets the mood, so to say.

Pam Currie
Yeah.

Pam Currie
huh.

Wendy Skemer
to understand the Rob’s better. So let me give just a little story and I always have fun doing this. So let’s say I go rogue and I quit my job today. And I promise you I’m not going anywhere. I’m gonna ride this wave. It’s an amazing wave to be on, but I quit my job today. And let’s say I get a new job at Amazon. So I leave my job at Benetrends. I have a 401k. Let’s assume I have $100,000 in my 401k. Boy.

Pam Currie
Mm-hmm.

Pam Currie
cut.

Wendy Skemer
love my job, but I am so excited about my new job. And so what I want to do is I want to move my 401k from Benetrends. I want to move it over to my new job. A lot of us have done that in the past. Sometimes we move that money to a rollover IRA, but we know that regardless of how young or old we are, we can do that without tax or penalty. So if you’re thinking, I’m 60. And if you’re thinking, Wendy, you look like you’re turning 60, you’re right. And you know what that means?

It means that you can roll your money over without tax or penalty, but you would still, without penalty, excuse me, but if you touch that money, you’re still paying taxes. So this program is an amazing option, even if you’re not saving on the penalty, because you’ve earned it, because you’re not paying taxes. Okay, so anyway, back to my example. I’m at my new job at Amazon. I call Fidelity. They’re my custodian. They hold my 401k. And I roll my money.

Pam Currie
Okay.

Wendy Skemer
from Benetrends 401k to my new job here in my new cubicle at Amazon. And I’m on the phone with my financial advisor and they’re saying, do you want to invest in like funds? What do you want to do with your money? Well, I’m really excited about my opportunity here at Amazon. And you know what? I want to go all in. So I want you to get in cash and take all of that $100,000 and buy stock in Amazon.

There’s no taxable event. I went from one investment to another. What happens to my money? Right? This is something I never thought about until I came to Benetrans, which is kind of interesting. But anyway, when, when I bought that stock in Amazon, I’m usually just focused on, wow, look at my new retirement plan. have a hundred thousand dollars worth of stock in Amazon. Woohoo. Right? I hope everybody continues to order from Amazon.

Pam Currie
Mm-hmm.

Pam Currie
Okay.

Wendy Skemer
But what I don’t realize usually is my money just went to Amazon. So their corporate office, whatever their corporate bank account literally just received my money and I bought a little piece of that pie. So just keep that in mind. Well, here’s how we do the Rob’s. We set up your business opportunity as a C corporation, just like Amazon, except

Pam Currie
Okay.

Pam Currie
Mm.

Wendy Skemer
You’re privately held. This doesn’t get spoken about enough. A lot of folks are always like, I need to be a C corporation. I need a board of directors. All my CPA is going to be so upset. No, you need to be a privately held C corporation. What does that mean? That means you have all your voting rights. That means when you go to your board of directors meeting or whatever, you’re taking your spouse or your best mate. You’re going to a nice dinner.

You’re sitting down, you’re talking about your business, you’re signing your minute book and boom, there’s your board of directors meeting. It’s not this arduous corporation. Okay. So we set you up as this privately held corporation. can be a one person board of directors. Then we customize a qualified retirement plan for your company to sponsor. Just like Amazon sponsors a 401k, your company will sponsor a qualified retirement fund.

There’s better than 401ks, but we don’t need to go into that today, but it is a customized plan. So what that does is as an employee of your C corporation, right? Remember I can’t, I can’t participate in Amazon’s 401k. I’m not an employee. So as an employee of your C corporation, you can participate in your plan just like I can when I joined my new job, because that’s exactly what you just did. You just joined a company.

your company, you’re the employer, but you’re an employee also. So you can participate and Pam, you can do the same thing I did. Roll your eligible money into that new plan and buy the privately held stock in your corporation. What happens? Your retirement plan as an individual, as an employee gets the stock. People always ask, what’s it valued at? Your company, if you rolled over a hundred thousand dollars, your company’s worth a hundred thousand dollars.

Pam Currie
Yes.

Wendy Skemer
That’s what it’s worth. Maybe it’s a dollar a share, a hundred thousand shares. Your corporate bank account gets a hundred thousand dollars in its entirety, just like Amazon. Len, when he created the founder of Benetrends, when he talks about this program, he always talks about how it made him crazy that folks could use their money to invest in everybody else’s dream, but not their own. And this is in the early eighties when he started to investigate the code and the statutory law and

Pam Currie
How are you?

Wendy Skemer
realized and went and met with the IRS with the Department of Labor. They’re like we never said you couldn’t be your company and light bulb on industry started. Anyway, he’s winning an award at the IFA this year well deserved. But my point is this at the end of the day you can benefit for your company just like Amazon did. I want to mention two things before I go to your next question if that’s okay. So I feel when I speak to folks that one of the biggest reasons

Pam Currie
you

Pam Currie
Absolutely.

Wendy Skemer
that are largest reasons or biggest concerns why they haven’t done this before, why they haven’t opened their own business, bought an amazing franchise is because of their fear of failure. So I always like to highlight if you do a Rob’s and you fail, guess what? You’ll never pay tax or penalty on that money. Just as if Amazon doesn’t do well, I don’t get penalized for that, right? I’ll never pay taxes on that money. So I feel like

Pam Currie
you

Wendy Skemer
And I’m quoting a lot of the senior executives here at Benetrisers, but I feel like it’s the smartest way to fail. Because if I want to invest in a business, why not use money that’s invested in other people’s business that’s at risk anyway? And then another thing on the other side, right? Because none of us are going into this to fail. We’re all going into this to be successful. Guess what? Through contributions, if you want to pay dividends, we can talk about that as well. But there is a way.

Pam Currie
Wendy Skemer
that you can get that money back into your plan. The idea is I’m going to buy this franchise, or I’m going to buy this business. I’m going to grow my business. I’m going to take a salary, and I’m going to be able to make tax-deferred contributions back to my plan. Another aspect of the Robs that doesn’t get talked about enough is that you are innately now an employee with the ability to make those tax-deferred contributions. If you just lost your job and you’re thinking, now I have to just do my IRA, no.

You can have that company sponsored plan benefit when you do the robs and, which I think is very important, if you’re hiring people, you can offer the plan to them as well.

Pam Currie
So I’m going to peel back a couple items there. A couple questions that come to mind. When is your retirement account not eligible for a Rob’s and when is it eligible for a Rob’s?

Wendy Skemer
Great question. Okay, so let’s start with an IRA. If you have an IRA that’s pre-tax, so it’s a traditional IRA, it’s a rollover IRA, it’s eligible. If you have a Roth IRA, so you’ve paid the taxes, unfortunately, it is not eligible. And not to be morbid, but if you have an inherited IRA from anybody other than a spouse, it is not eligible. But don’t kick off your spouse. We’ll figure out another plan.

Pam Currie
Okay.

Pam Currie
Okay.

Pam Currie
Okay.

Wendy Skemer
If you are currently working, most likely you cannot use your 401k unless you’re 55 or older or you terminate. That’s the same if you’re a police officer, you have a 457B, if you’re in the service and you have a thrift savings plan, if you’re a teacher and you have a TIA craft, all of them are eligible upon terminating. I always recommend if you think…

I have a plan, but I don’t really even know what my plan is. And this this happens a lot, you guys. It’s, you know, no judging. I will always take a look and find out and make sure what is eligible. Sometimes a piece of it is eligible. It’s a great question.

Pam Currie
Sure.

Pam Currie
Yeah, no, and then no, and thank you for the answer. So just to summarize, it cannot be typically with a current employer. Okay, and is there a minimum requirement that needs to be in that retirement account to have it make sense?

Wendy Skemer
Correct.

Wendy Skemer
You know, we always toss around the number 50,000. And you guys, when it is 50,000 or more, there’s no question it makes sense. However, I’ve had probably more than a handful of clients in my tenure here at Benetron’s where it did make sense to roll over less. And it all comes down to the numbers. So if I have…

Pam Currie
Okay.

Wendy Skemer
a situation where maybe the client really needs to get an SBA loan and the only way they’re getting it is accessing their $42,000 in the Rob’s, it makes sense. Legally, you can do it for $5. It just doesn’t make sense. So if I have somebody who comes to me and says, you know, I’m 62 and I need about $30,000 and I have it in a pre-tax IRA and I haven’t been working at all this year, I would be…

giving them bad advice to convince them to do a Rob’s. Pull the money out, pay the tax, you’re in a lower tax bracket than you will be once you buy the business, and bite the bullet. But if you need money later, right? So I need to know all the details, but 50,000’s a good benchmark.

Pam Currie
Gotcha.

Pam Currie
Mm-hmm. Okay, that’s good to know. And I guess another important point to make is this, because you’re not getting a loan, your credit score doesn’t impact your ability to do a rollover.

Wendy Skemer
100 % Pam, I had a client that was working on an SBA loan. They came to me and said, I don’t want to touch anything. I don’t want to touch my house. I don’t want to touch this stuff. I just want an SBA loan for like 150,000. Sometimes it just makes sense to try to convince them to look at other options. I never want to, and I kind of lost track of my thought, but I wanted to emphasize.

Pam Currie
Pam Currie
Hmm.

Wendy Skemer
I’m never pushing to do a Benetrans product. It’s gotta make sense. It’s just gotta overall for the goal today and tomorrow. It’s gotta make sense.

Pam Currie
absolutely.

Pam Currie
So I’m kind of, yeah, we always refer to this program of using your retirement accounts as ROBS, right? It sounds funny, right? Who am I robbing here? ROBS, that’s an acronym. Would you like to share with our listeners what ROBS stands for?

Wendy Skemer
off

Wendy Skemer
Absolutely. It stands for Roll Over for Business Startup. You will hear about us calling it here at Benetron, it’s the Rainmaker Plan, but it is the Rob’s Plan. And even though it’s Roll Over for Business Startup, to your point that you made early on, Pam, it doesn’t have to be a franchise. It doesn’t have to be a startup. It can be an existing business as long as it’s positive value. And it can be, you just you came up with an idea and you want to sell a good or a service. So it can be used for that as well.

Pam Currie
Hmm.

Pam Currie
we’ve been talking a lot about putting together a what I consider be a custom plan for depending on the individual’s goals situation what if someone is seriously considering multi units meaning they want to purchase more than one franchise multi units is there a particular order or is there a best strategy when funding the first unit then the second unit and so on

Wendy Skemer
Yes, so when someone’s looking at multi-territory multi-unit, the most important thing to me to understand, what is their timing? I have some folks that, call ahead last night, they want to open two franchises at the same time. so, lender’s gonna look at one at a time. So here’s what I recommend, we get a loan for one, we use the ROBS for your down payment for the loan and to fund number two. And of course, that’s after analyzing what their portfolio looks like.

Pam Currie
Mmm.

Pam Currie
Sure.

Wendy Skemer
That’s a common strategy, but the most important thing when you’re looking to scale is to Stay liquid is to stay strong in your assets. So if I know I’m working with somebody like I’m doing a You know like a third We could I don’t want to say the brand but it’s like a school So it’s like a two to three million dollar investment. We’re on our third one You really want to remain strong if you know that your trajectory so

Pam Currie
Yeah.

Wendy Skemer
In some cases, it does make sense to use as little of your assets, take on that SBA loan right away. Two reasons why. One, now I’m still strong, my portfolio is strong, I didn’t touch my robs yet, or maybe I just took a little bit, but I saved some for later. Build that relationship with your lender, build your business. So as, let’s say you’re on a six to 12 month trajectory, because that’s usually what makes sense, especially if we’re talking brick and mortar, maybe 18 months. By that time, your business is hopefully cashflow positive.

Right? And so the bank is in a good position with you. It’s a great time if you do need additional debt for us to help you negotiate that second loan, or maybe you can utilize some capital from unit one and some robs from unit two and avoid additional debt. So the goal again is if I know somebody is on a trajectory to sum it up, I need to keep their assets and their liquidity strong for the long run. I don’t want to use that all up right away and not have that foundation.

for them to grow on. Hopefully that makes sense.

Pam Currie
that’s lot of information to take in. It’s like drinking from a fire hose. And that’s why you need someone who’s a wealth of knowledge with your expertise to help navigate and put together what I call a wise funding strategy. Really, really important. Yeah. So as you know, we represent a

Wendy Skemer
Thank

Wendy Skemer
Absolutely.

Pam Currie
what we call franchise resales and that’s when it’s an existing franchisee that’s looking to exit the system and sell their business. Is the funding strategy different if someone is looking to buy a franchise resale versus open up a new franchise unit?

Wendy Skemer
.

Wendy Skemer
If you’re looking for utilizing Robs, again, as long as that business isn’t upside down, it’s a strong cashflow positive business that has value. It doesn’t have a lot, have a lot of value to be honest. Like sometimes there’s a diamond in the rough, right? Maybe not the right business for me, but it would be a beautiful business for you. So with the Robs, again, as long as there’s a valuation done in the business and it’s positive, it could be a great resource. When it comes to the banks, a lot of folks are surprised to hear this. They love a resale.

Pam Currie
Absolutely.

Pam Currie
Mm.

Wendy Skemer
As long as it’s cashflow positive, they love a resale. And they will usually ask you to put less skin in the game. So you were talking about that 10 to 30 % when you’re looking at an SBA loan. If you’re looking at a resale, usually it’s only 10%. And so, yes, yes, absolutely. And in a lot of cases, what I love about a resale also is

Pam Currie
Okay.

Pam Currie
As long as it’s cash flowing, right? It’s be a thriving resale, right? Yep, I follow you.

Wendy Skemer
The seller sometimes is willing to do a little bit of seller financing which sometimes makes the new franchisee happy because they’re still involved lowers their total ask for their loan From the lender so it makes it even a little bit more attractive. So there’s a lot to work with on a resale

Pam Currie
Yeah. Do you ever run into a situation where, at least we have, where the seller has a very high valuation for their business and the lender comes and says, we’re not seeing the same valuation? Have you ever run into that roadblock?

Wendy Skemer
You know, we do. I don’t personally because I’m not in the the grind of it in the thick of it on my SBA side, but we do run into that and we always prep, you know, our clients to, you know, the seller should be getting an appraisal and you know, sometimes you want to make sure it’s an independent appraisal and you can challenge it, right? And you can, there’s a negotiation there that can happen. Kind of like buying a house, right?

Pam Currie
that side.

Sure.

Pam Currie
Yup. Yup.

Wendy Skemer
If I go to the mortgage company and it doesn’t appraise for what they’re selling, it’s the same kind of negotiation.

Pam Currie
Yeah, I follow you. I, you know, making an investment in a franchise and a business, it’s a big decision. You know, it hits on all cylinders. I say it’s a financial decision, a personal decision, a family decision, a lifestyle decision. How do you respond to concerns that naturally arise with the risk of starting a business?

Wendy Skemer
You know, that’s the first like thought I have when I’m getting on a call initially is that this person is probably nervous and you know Len always says

Pam Currie
Mm-hmm.

Wendy Skemer
If your clients aren’t nervous, then I don’t think they understand the magnitude of what they’re doing. And I try to get them to talk about it. I want to understand what is the fear? Is it funding? Because it’s like stepping on the scales sometimes. Folks don’t want to face the music, right? So let’s deal with it. And some folks are like, I don’t want you to look at my credit or my wife’s credit.

Listen, you can’t go to the doctor and not tell him what’s hurting or tell her what’s hurting. So, you know, I’m not judgy. know, we can talk about my journey. You want me to give you stories? I can. But we’re here to talk about you. Let’s just get the facts so I can help you. If it’s a bankruptcy, you know, there’s usually a story. But if I don’t know that and I don’t know when your bankruptcy was discharged, I might be giving you an option that is not an option. So I’m not using your time wisely.

Pam Currie
Mm-hmm. Mm-hmm.

Wendy Skemer
So I just assume folks are really nervous and I agree. I validate. You’re making one of the biggest decisions in your life. Validate, validate, validate. Don’t only validate the franchise. Don’t only validate the genre. Validate all your funding options. Let’s look at everything. And I always do think this is helpful. We have a really long history here at Ben Trans. I mean, we’ve been here since 83.

Pam Currie
Yeah. Yeah.

Absolutely.

Pam Currie
Mm-hmm.

Pam Currie
Mm.

Wendy Skemer
We have a long list of franchisees and business owners at different phases of their journey. Folks who have sold their business and we help them not pay capital gains tax. Folks who just started their landscaping business for their son. So we have so many different options or folks that you can talk to that can help you. I always say, people are usually nervous about…

an opportunity until they start talking to other people that have gone through it. And all of a sudden they hear, they’re a year out and they’re doing great and they survived. They paid their bills. So a lot of times I think having those resources, not only the expertise of Benetrans, but the huge pool of clients that we have that are happy to talk about themselves and their success. And listen, it’s not always success, right? We’re not always going to end up making $5 million.

Pam Currie
Yeah. Yep.

Wendy Skemer
By a hundred thousand dollar investment like the client. I want everybody to talk to right You know some folks are just doing this because I want to make a modest living, but it’s been a great journey Or some folks had bumps in the road though. Just like validating the brand you do want to I feel like those conversations really help

Pam Currie
Right.

Pam Currie
Mm-hmm.

Pam Currie
Yeah, agreed, agreed. Do you have any thoughts on why franchising versus starting a business from scratch? thoughts on that?

Wendy Skemer
You know, I love this question and this comes up for me a lot, You know, not everybody is an inventor. So for starters, if you’re like, I’m not, you know, I think I’m so creative and smart. You know, I’m definitely never the smartest one in the room at Benetron’s or usually in any of these franchise situations. People are really creative and innovative. That’s not my jam. So I want to be able to build on that. I want someone who’s made the mistakes, has a proven model, went through that arduous process of building something.

You know, I feel that you can really be an entrepreneur and follow a system. I’m still a business owner. I work for myself, just not by myself. I like that camaraderie. I think the F word is a great word, just saying. And I would never want to not buy a franchise. And it doesn’t mean that you’re not running your business. It doesn’t mean that you’ve room to be creative. I tell folks, just follow the system year one. And then you’ll realize

Pam Currie
Yeah.

Wendy Skemer
how smart you were to buy that franchise because they really have it figured out. I don’t want to reinvent a wheel, right? There’s a wheel there. Give me the wheel and I’ll use that wheel. Show me how to use it and I’ll follow your system and I love that. And I think most statistics probably do show and I don’t have the data, I’m a data gal, but statistics I know historically have shown much more success when you’re using a proven model like a franchise.

Pam Currie
I’ll snap.

Wendy Skemer
Doesn’t mean you’re not gonna hit it big, much riskier.

Pam Currie
Yeah, agreed. I always called a risk mitigation strategy to business ownership. That’s franchising hands down. So in your yeah, and of course, another way to make money is to have a job. But why do you think business ownership is becoming more popular? For many out there versus the JLB.

Wendy Skemer
Absolutely.

Wendy Skemer
You know, the reason why I just turned around is because I wrote something down about this because I was in a conversation recently with our senior executives. You Benetrans has been around, like I said, a long time. Last year was a record year for Benetrans. I always in Q1 analyze my business. Where did it come from? Who do I work with? Who’s my clientele?

Pam Currie
short.

Pam Currie
Mm-hmm.

Wendy Skemer
It’s shocking me how much younger my client is today than when I first started here at Benetriens in 2013.

Pam Currie
Interesting, I know we’re seeing this.

Wendy Skemer
One of my calls this morning, 32 years old and very well equipped to be a business owner. Just, I love it. But the reason why I think it’s happening, folks want greater control over their future and they’re realizing more and more that, you know, and I see this in my adult children. I went to a great school. I’m an engineer and I’m underemployed and I don’t love what I do. And maybe I would have been better off investing that money in a business.

Pam Currie
Mm-hmm.

Wendy Skemer
I think folks are starting to think about wealth building and realizing that maybe real estate isn’t the only way to do it or gold or crypto, whatever your thing is. I think a lot of folks are getting on the bandwagon that small business is a great way to build wealth, generational wealth and legacies. I do think folks are just bored with the whole W-2. Am I gonna get laid off again? And they wanna diversify their risk. They wanna maybe…

You know, again, I know it comes to control, but also in some cases, I have folks that are telling me I am going to look for another job, but boy, I’m going to also invest in a small business because I’ve just been laid off. I hear people getting laid off two, three times and they’re not even 50. I mean, that is a new trend. So most importantly, I think, I do think it’s legacy building. think folks are starting to think, how am I going to do that? I’m not going to work in a company for 30 years and then bring my family in.

Pam Currie
Mm.

Pam Currie
Yeah. Yes.

Wendy Skemer
And they’re going to work, like, how else can I do it? But I do think there’s a lot of instability in the corporation and in the economy. And I think that that makes folks want to gain that control and have something to lean on and have a revenue stream.

Pam Currie
Mm-hmm.

Pam Currie
Yeah.

Pam Currie
I agree with you, Wendy. I think that corporate America really is a false sense of security. It really is. And you’re right with the number of layoffs. Yeah, downsizing, right sizing, whatever you want to call it, definitely. So what you explained about, you know, obviously understanding your funding options and the…

the core of what you’re able to do, get in there and really do a customized, create a wise funding strategy is a very, very important piece of the puzzle. But it also sounds a little bit complicated. Like you said, it’s a string from the fire hose. So what is the process of working with Benetrans and getting approved for funding, doing a ROBS? How does all of that work?

Wendy Skemer
I like to look at business ownership just like when I’m going to buy a house. What’s the first thing I’m going to do? I’m going to educate myself in funding, right? Because I don’t know what neighborhood to shop in. So the point I’m saying that is I don’t think there’s an early enough time to start talking about funding. So having an initial consultation with a representative here at Benetrans, like myself, there’s no cost.

And it’s endless. mean, I have a client that we talk every three months because she’s not retiring till next year. And so she’s going to do a Rob’s next year, but we’re getting prepared and it makes her feel better that she’s on this journey and we’re touching base and we’re talking about what’s happening. We’re thrilled to help you on that journey. So here’s a list that I went through. I said, like, what’s the roadmap for Benetrends to help you? That initial consultation, education. And that doesn’t mean one consultation. It just means whatever it takes.

to get you comfortable to then start sharing with me what is your financial profile. Because that’s when we’re getting serious. Like you need to tell me everything. Sometimes folks just want to know what their options are and they don’t feel comfortable sharing any information yet. Okay, but then the next step is going to be for you to come clean, step on the scale, let’s figure it out. Once I see what I have to work with, I do come up with, and we here at Benetrenzel come up with a funding design, a strategy.

Pam Currie
Bye.

Pam Currie
Mm. Mm.

Wendy Skemer
I literally just sent an email this morning. It had five different scenarios for this gentleman to buy a home health, in-home non-medical healthcare business. I think I said that right? Okay, so as soon as we have an idea of what our strategies are, what are our options, get pre-qualified is part of that. I don’t want to tell you, know, an option is SBA if you’re not pre-qualified, right? I want…

Pam Currie
Mm-hmm.

Pam Currie
Yeah. I’m turning that off. Yeah.

Wendy Skemer
something behind it, a pre-qualification lasts 90 days. Let’s get it done. There’s no cost, there’s no hit to your credit, there’s no obligation. So if there’s any kind of pre-qualification process, if it’s a ROBS, I want you to know for sure that your funds are eligible. So I’m gonna make you look at your statement with me to make sure that it’s what you think it is, okay? Because the last thing you wanna find out is that it’s not eligible. Maybe, you know, I’ve had folks think they have a rollover and it’s a Roth. So we just wanna understand.

It’s implementation. Are we doing an SBA loan? If so, we’re in underwriting. We’re doing our business plan. We’re talking cash projections. I’m trying to get them. I always say, if you’re doing an SBA loan, if you’ve ever been through a divorce or any kind of financial situation where you have to freeze, you know, I want you frozen during this process. You’re not buying a car. You’re not buying a diamond ring. We’re frozen. We’re just going to get through this process. Once we get through the implementation, getting the Rob’s set up.

getting an SBA loan funded. It’s all about ongoing support. So if it’s Rob’s, we’re doing their third party plan administration, keeping them compliant ongoing. If it’s an SBA loan, we’re an advocate. I always tell my clients, don’t ever forget that. I know you get all caught up with your relationship with the lender, but they might sell your loan. You do want to build a relationship with that new person, but keep us as your advocate always. And then lastly, most importantly,

Pam Currie
Wendy Skemer
What’s your exit strategy? We want to know what that is day one. It might change, but we want to understand all our ways to get out of this or to leave this to a family member and make this a legacy. We want to understand that from the onset.

Pam Currie
Awesome, awesome. Thank you for giving that roadmap. Very helpful. All right, so we always like to close out our podcast with this closing question. Wendy, what tips would you give to budding entrepreneurs?

Wendy Skemer
I hope this doesn’t come off wrong. I mean, it’s easy to say, make sure you’re well capitalized, right? That’s easy. And of course, capital, capital, capital, liquidity, all that mushigas. But I think the most important thing to be a business owner is the ability to make a decision. And I’ve seen that over the years. You want to make a decision. There’s never a perfect situation. I always joke around. If I have a call and I’m…

Pam Currie
What the?

Pam Currie
Mmm.

Wendy Skemer
talking to the clients over and over again, and all I’m hearing are all the negatives, all the things that can go wrong. I want to wait until all my kids are out of college and they all have babies and, you know, my wife’s totally secure in her retirement or whatever. There’s no perfect situation. Have the ability to make a decision. And you know what? It’s okay. We stub our toe. That’s part of life. I can’t tell you how many clients I have that are on their second or third business opportunity and are now…

killing it because they didn’t give up. I think that’s really important. Make a decision.

Pam Currie
make a decision. like that. Gosh, but Wendy, I can’t say enough. You are a wealth of knowledge. And it was, yeah, great to you on the show. Thank you for all, for everything that you shared. Very helpful. And to our listeners, yeah, absolutely. And to our listeners, if you are listening and considering franchise ownership, request a free Franchise Sisters consultation call.

Wendy Skemer
Thank you.

Wendy Skemer
Thank you.

Pam Currie
We would welcome having a discovery call with you, giving you some resources around funding, common approaches to funding a business is one of the eBooks that we have, and we’d be happy to share that with you. Our mission is to help you navigate the franchise selection process through our client-centric align methodology. We want to make sure we’re putting you in a position to make an informed decision. And like we say, we want to help you investigate before you invest.

So thank you for tuning in. This is Pam, one of the Franchise Sisters, signing off. Windy fist bump. Thank you. Take care.

Wendy Skemer
Thank you. Thank you. Appreciate you.