LAS VEGAS —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
Speaking at the Restaurant Finance & Development Conference, an event produced by Franchise Times and held here in November, executives from GE Capital, Irwin Franchise Capital, Wells Fargo Foothill and Trinity Capital told operators that the best way to secure capital despite the frozen credit markets was to diversify lending sources, shore up operations and disclose as soon as possible any problems that could create a default. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
“This industry clearly has a reason to exist,” said Richard Kritsch, senior vice president and managing director of originations at Wells Fargo Foothill. “The best loans will be those closed today, not the ones given two years ago.” —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
During 2008, a year that included a market meltdown and a credit freeze, many operators struggled to secure new financing for growth, and some met their match in lenders that increased prices, charged fees or restructured whole credit facilities because of broken covenants. The messy year came on the heels of unprecedented growth in the restaurant space, as traditional lenders and other deep-pocketed investors, such as private-equity firms and hedge funds, handed out a tremendous amount of capital at low rates. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
Today, competition to secure financing is tight. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
“The restaurant industry will have to compete with other industries for capital now,” said Kevin Burke, managing director at Trinity Capital LLC. “Lenders will tighten and be more selective.… It is unrealistic to expect the same criteria.” —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
To play by the new rules, operators must first look in-house prior to approaching a lender. The business plan must be detailed, accurate and showcase a history of sales and profit gains. Vendor contracts should be up to date, and bills should have been paid on time. When there are problems, specific reasons for a downturn in sales or a missed payment should be readied so that lenders can see the entire picture. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
“A lot of firms are not well prepared in terms of capital, marketing and purchasing,” Burke said. “There are ‘haves’ and ‘have nots.’” —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
Burke said borrowers should know that lenders are looking to finance concepts that have a reason to exist, provide value to the customer and showcase consumer relevancy. Already there has been an increase in industry failures with bankruptcies and mass closures, and lenders will be wary of risky propositions, he said. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
“The industry knows how to work hard,” said Sharon Soltero, marketing vice president of franchisor relations at Irwin Franchise Capital. “Return to that focus, get involved in day-to-day operations.” —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
Soltero also suggested that operators look to various sources of funding, including regional and local banks, as well as the major national players. Different lenders may be more open to finance a specific part of the business, like real estate or equipment, for example. In addition, many local and regional banks haven’t been as affected by the changes in the financial industry as national banks have. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
For operators that are struggling to maintain compliance on already-agreed-upon lending terms, sources said transparency and communication are paramount. While an increase in pricing is the most likely result of any breach, keeping a lender in the loop at all times can grease the wheel during negotiations. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
Even with all of the changes and challenges, lenders said they still would provide capital to the best operations. —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.
“What I’ve learned is that this is a durable market,” said Trey Brown, senior managing director of GE Capital Solutions, Franchise Finance. “There are reasons, to be sure, for this industry to be around.” —The rules of the lending game may have changed dramatically, but operators still can find financing in the new year, according to officials at some of the restaurant industry’s leading lenders.