Franchisors and Business Brokers

Siegel Capital feels it is appropriate for us to share with you how the sub-prime fiasco is affecting financing new franchises and business acquisitions.

First, let’s understand what really happened. Companies pushed Congress to change the rules so they could lend 100’s of thousands of dollars to people who could not qualify for a $5,000 Visa Card. The mortgages only made sense at extremely low interest rates…which would then increase a year or two or three later. These lenders did not care that the borrowers would default, because the property values were increasing, and they would take them back.

With the slowing of the real estate market, and the ensuing decrease in property values, down came the house of cards.

Now they expect us to clean up their mess.

Unfortunately, the lenders, who finance franchises and business acquisitions, may be part of an organization that also generated sub-prime loans, or acquired these loans, or became involved in other financial instruments tied to these loans. Additionally, SBA loan performance dipped in third quarter of 2007. This may be due in part to folks no longer being able to dip into home equity to get through a difficult period. As a result we are definitely seeing some lenders change their lending criteria….in some cases drastically.

BLX, a national Preferred Lender, has stopped participating in the 7-A loan program all together. Other lenders have increased their required down payments, increased the collateral coverage ratios, and/or are now requiring direct experience, even in a franchise start-up situation.

Siegel Capital is working hard to define the new rules for each lender, and use their leverage to locate lenders, without ties to sub-prime, to keep the flow of capital to continue to drive your system.

We are sure that 2008 is going to be challenging. But we are committed to solving your financing problems before they become a problem. We look forward to helping your buyers and franchisees have a smooth financing experience.

“Intellectuals solve problems….geniuses prevent them”
Albert Einstein

The Siegel Team is there for you!

Ron Feldman, Nate Greenberg, Bernie Siegel
http://www.siegelcapital.com/