As years go by, more franchise systems are making use of lending programs to encourage financing and entice people to buy franchise despite the difficult times the lending environment is going through and the increasing demands to stimulate growth. However, such move is not a prudent tactic for everyone, according to Infinity Franchise Capital’s vice president of franchisor Sharon Soltero.

During the Franchise Finance & Growth Conference at the Four Seasons in Las Vegas, Soltero began her talk by telling those franchisors, or anyone who advertise franchise opportunity, that they ought not to do lending programs. Having worked on said programs herself, she related on how the process can be very stressful, difficult, and time consuming. She mentioned, in fact, that these programs require up to three months to get things started for both franchisee and those who buy franchise.

Soltero also gave further tips for those who still insist on using lending programs. For instance, franchisors must confirm if they are legally allowed to make use of such programs or determined enough to be able to implement it. She related how many franchise opportunity sellers, whom she worked with in the past, became quite interested in the program but eventually changed minds after going through the difficulties. These include problems in the loan contract, legal concerns, and convincing the company’s board.

In order for such programs to be successful, franchisors are advised to ensure loan guarantees. Such strategy appeases lenders and increases the program rates, both of which consequently improve participation and ensures the program’s success. Furthermore, franchisors committed to loan guarantees tend to exert more effort in making the program to function as intended.

Despite the aforementioned troubles that accompany lending programs, some benefits can also be had. For example, Burger King’s program helped boost the fast food chain’s remodeling program. Denny’s, on the other hand, went through a significant kick start development when its lending program—amounting to $40 million—aided its franchisees to convert 140 restaurants located in Flying J Travel Centers. To cap it all, the lending program is a great tool in solidifying the relationship between franchisor and those who buy franchise.

If franchise opportunity sellers want to reap the benefits of lending programs, they must certify that the programs are going to be used, monitored on a daily basis, and have a solid contractual agreement. Soltero related how the lending programs she had been involved with never lost a dime because they were done correctly with full commitment from their franchisors.