FRANCHISING

Presented by: Group 5 Presented to:

Abalos, Rikky Jhoy Ma'am Imelda Mayuyo
Amansec, Janice
Caliste, Mary Rose
Casinillo, Jessa
Casusa, Jenny
Ignacio, Cherry
Lagarto, Rose Mae
Good day everyone! We are the group 5
presenting the lesson 4 to 5 of unit 7
entitled capital formation strategy.
UNIT7: CAPITAL FORM
ATION STRATEGY
LESSON 4: DEBT FINANCING
ALTERNATIVES FOR GROWING
FRANCHISOR
 So now, let's define what is debt financing?

Debt financing is a process in which a business

borrows money to fund working capital, the
purchase of specific assets, or other operations.
This money is to be paid back at a future date
with interest.
How does debt finan
cing works?

Three overarching structures that a

growing franchisor can avail.
 Business term loans - In this case, a franchisor borrow a

set amount of money from a lender, receive a lump sum

upfront, and pay the money back, with interest, for the

term of the loan.

 Line of credit - With a line of credit or a revolving loan,

you have access to a set credit line that you can pull from

and use as needed.

 Cash flow loans - With cash flow loans, you receive an
advance of funds based on the revenue you’re
earning. Then, instead of paying back money over time, with
interest, you receive the remaining percentage of your
revenue, minus the lender’s fees, as your cash flow comes
in. Invoice financing and merchant cash advances both
could be considered cash flow loans.
 Debt Financing Exam
ples
Based on the three structures, all of the following would be
considered examples of debt financing
• Loans from family and friends
• Bank loans
• Personal loans
• Government-backed loans
• Lines of credit
• Credit cards
• Equipment loans

• Real estate loans

 Sources and Types of Debt
Financing
Overall, there are a variety of sources that a franchisor can

turn to for debt financing, including:

•Banks and credit unions

•Online, alternative lenders

•Nonprofit lenders

•Merchant cash advance companies

•Friends and relatives

 A Quick Guide to a
common Business Loa
n Requirements
There are some requirements a franchisor need to meet in order to qualify for a business loan

based on the lender working with.

1. Time in business

2. Personal credit score

3. Annual business revenue and profit

4. Loan purpose

5. Desired loan amount

6. Business plan

7.Legal contracts and agreements

What are the possibl
e consequences of a
franchisor in formin
g capital through de
bt financing?
 Early-stage franchisors have not had much luck with

commercial banks over the past two decades because most

creditors prefer to see ‘‘hard collateral’’ on the balance

sheet.

 A second problem is that most lenders choose to see the

proceeds allotted primarily to the purchase of ‘‘hard

assets’’ to further serve as collateral.

Lesson 5: THE USE O
F INITIAL PUBLIC OF
FERING BY GROWING F
RANCHISORS
Initial Public Offer
ing (IPO)
It is a process whereby a growing enterprise opts to
register its safeties with the Securities and Exchange
Commission (SEC) for sale to the general investing
public for the first time.

‘‘Going Public’’

is the epitome of financial success and reward.

 The planning and an
alysis process invo
lves:
1. A weighing of the costs and benefits of being a public company.

2. An understanding of the process and costs of becoming a public

company.

3. An understanding of the company's obligations, its advisors, and its

shareholders once the franchisor has completed its public offering.

 Benefits of IPO:
1. Significantly greater access to capital.

2. Increased liquidity for the franchisor’s shares.

3. Greater prestige in the financial markets.

4. Enhancement of the franchisor’s public image which may

increase franchise sales.

5. Opportunities for employee ownership and participation.

6. Broader growth opportunities, including the potential for the merger,

acquisition, and further rounds of financing.

7. An abrupt increase in the wealth of the franchisor’s founders.

Franchisors who are not intimidated by the disadvantages of being

publicly held:

1. Those who are operating in a disclosure-oriented business.

2. Those who are already compelled to provide audited financial

statements.

3. Those who feel that being publicly held will increase credibility,

which generally increases franchise sales.

Thankyouu!