Structuring Loans for Franchised Businesses: Considerations for Borrowers, Lenders and Franchisors; Role of SBA

*** This program has been cancelled ***

A live 90-minute CLE webinar with interactive Q&A


Tuesday, July 11, 2017
1:00pm-2:30pm EDT, 10:00am-11:30am PDT


This CLE webinar will enable finance counsel to structure and document loans to franchised businesses. The panel will also discuss comfort letters and equivalent documentation that lenders employ to resolve issues contained in franchise agreements, and U.S. Small Business Administration (SBA) requirements with regard to franchise lending.

Description

Franchise lending varies from other types of commercial finance because it is in some respects a three-party transaction. The franchisor wants various controls over the franchisee’s business and the lender needs to be able to exercise its remedies and potentially take over and transfer the business without losing the franchise or incurring excess costs or fees.

Certain terms and conditions in franchise agreements—including provisions governing pricing and operations, restrictions on the ability to assign the franchise, rights of first refusal, and purchase options—are often unacceptable to lenders.

Counsel must analyze the key provisions in franchise agreements and be prepared to negotiate a tri-party agreement or other amendment to the franchise agreement that will address lender concerns while preserving the authority of the franchisor to control its brand.

The SBA provides credit enhancement in the form of a guaranty of qualifying loans and has developed criteria for underwriting and closing franchise loans of all types. The SBA standards are instructive for franchise borrowers and lenders generally and should be taken into account if an SBA guaranty is to be part of the lending transaction.

Listen as our authoritative panel examines the issues unique to financing franchise businesses, and how best to structure and document loans that work for the franchisor, franchisee and lender. The panel will also discuss the prominent role of the SBA in franchise financing, and the forms and processes the SBA employs to address these concerns.

Outline

  1. Competing concerns of franchisors, franchisees and lenders
  2. Lender issues with franchise agreements
    1. Restrictions on the ability of the franchisee to transfer the business or an interest in the business
    2. Franchisor billing and collecting procedures
    3. Establishing a price for the sale of assets upon termination, expiration or non-renewal of the agreement
    4. Ability to assume control of franchised operations or employees (step-in rights)
    5. Pricing
    6. Right of first refusal (ROFR) on an assignment or change of ownership
    7. Option to purchase/lease real estate owned by the franchisee
  3. Making franchises financeable
    1. Amendments to franchise agreements
    2. Tri-party agreements
    3. Lender evaluation of the franchise
  4. Requirements for acceptance of franchise loans into SBA programs

Benefits

The panel will review these and other key issues:

  • What are the competing concerns of franchisors and lenders when a franchised business is being financed?
  • What are the key provisions of concern to the lender in a franchise agreement, and how might they be amended?
  • How does the SBA look at franchise loans and franchise brands in deciding whether to provide a guaranty?

Faculty

Nicholas C. Jellum, Shareholder
Anastasi Jellum, Stillwater, Minn.

Mr. Jellum represents financial institutions and protects their interests in government guaranteed lending transactions. He has extensive experience particularly as related to SBA and USDA loan documentation and liquidation. He also focuses a significant portion of his practice on advising financial institutions on all aspects of commercial loan transactions, from loan documentation to loan collections and recovery. He has significant experience handling commercial loan workouts, collections and foreclosures on behalf of lenders.

Stephen J. Olear, District Counsel
U.S. Small Business Administration, Los Angeles

 


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This webinar is eligible for at least 1.5 general CLE credits.

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