Episode Transcript
[00:00:03] Speaker A: Welcome to create wealth through franchising podcast and Kim Daily TV. I am your host, Kim Daley. I want to educate, motivate and inspire your business ownership journey by interviewing CEO's leaders, sales coaches, and exceptional franchisees to learn their valuable insights and strategies that we can apply to our own business ownership dreams. Now onto the show.
Welcome back to create wealth through franchising podcast and Kim Daily TV in the house today is my very long time friend. I think I've been with her for about 22 years. Not always on the lending side, but in the house. Today. No stranger to Kim daily TV is Shirley Kefjan. She is the senior director of business development for Fran Fun. Did I get it right, Shirley?
[00:01:00] Speaker B: Yes, you got it.
[00:01:02] Speaker A: Yay. Thank you so much for having me.
[00:01:04] Speaker B: It's really great to be back here with you again.
[00:01:06] Speaker A: Oh, it's so good to have you here. Those of you who follow me know her face and her voice. She is no stranger to my studio. And there's a reason for that. Because when I find people who are experts at what they do, I'm very loyal to them. And Shirley is my girl. I couldn't do what I do and help all of you if I didn't have this fantastic woman right by my side. So she's the lending expert and the reason I've invited her onto the show in let's see, where are we in April of 2024 at the time of recording is what I've noticed is there's a lot of false evidence appearing real, aka fear appearing real, around the lending landscape. Right. Is now a good time? With interest rates so high, should I even be thinking about a business? A lot of concerns that now is not the right time to be investing in the business because the rates are too high and I can't afford the loan. So, Shirley, let's just dive into the meat of the conversation. Is now the right time to be shopping alone for a business?
[00:02:11] Speaker B: If now is the right time for you to open a business, then, yes, now is the right time to be shopping alone. So I really don't think that today's lending environment is any more harsh than it has been before. Are interest rates a little bit higher today than they have been in the past? Sure, and that's simply as a result of the prime rate itself changing. But the SBA, the small business Administration, that provides a secondary sort of backup guarantee to the banks that are writing these loans, they've waived their fee on loans, $1 million and below. So there are some things out there that can help offset that a bit that I think still make it very worthwhile to be exploring lending at this time.
[00:02:55] Speaker A: She slayed it, guys and gals. I mean, the perfect way to start a conversation with Kim Daley is to say now is the time. If now is the time, because is there going to be a better time? If you're going to put it off because of lending, you're probably going to put it off. Okay, so let's dive in even further. And I like what you said. Like, I didn't, I wasn't even aware of, like, there are concessions, you know, on one side of the, of the lending world in order to make up for things that are higher on the other side of the world. Okay, so if a candidate comes to you, let's just talk a little bit about your process. I mean, I know when I introduce you, but how soon in the process of exploring a business or thinking about a business, should somebody speak to you or someone on your team?
[00:03:40] Speaker B: So I think sort of the perfect time to really start engagement in a funding conversation is once you've started to get a feel for, and it does not have to be perfect. Right? We're talking estimates here, but once someone has started to get a feel for what the startup cost could look like, am I looking at a business where I need access to 150,000 in total capital? Am I looking at a business where I might need access to 500,000 in total capital? Again, does not have to be perfect, does not have to be set in stone. But I think that the conversation itself and sort of the exploration around which options could work can be a bit more meaningful if we have an idea of what is the need, what's the goal that we're trying to reach here.
I would say at the latest point, the very latest point that we want to be exploring options would be maybe once you have scheduled your visit to CA franchisor face to face, certainly before that visit happens, but maybe once you've booked your ticket, right, you have that date on the calendar. We really need to make sure that we're helping you to get your funding strategy figured out by that time so that you're well prepared for that meeting. You're walking in with a pre approval letter. If an SBA loan is the right strategy for you, you know, you look like you're ready to make the decision that, you know, the franchisor needs to see that preparation as well. So I think that helps on both sides there.
[00:04:59] Speaker A: It was a great answer, and it was sort of like I laid that up so I can slay it down. Because if you're a candidate in my process, this is what's going to happen. We're going to gather all the data and I'm going to eventually present companies to you. You're going to go on what I call the blind date round, which is your speed date. You don't know what I'm going to present to you, and I don't give specific information. So you have to go on the dates to hear the secret sauce of each franchisor to figure out among the small group of options which one feel like the best opportunities for you to really dive in and start dating. Okay, so now we're going to go one more week into the process. So you're going to. Usually the first call with a franchisor is that kind of like high level overview because they know that you didn't beg me for a gutter business, right? I'm telling you, gutters are your dream business. So you got to find the connection before you're like, okay, I'm believing you, Kim Daley. So you go through the round one. Now we're going to get one step in, which is the second call with franchisors, oftentimes is where we go through unit economics, where they're going to talk about money in and money out. So they talk about money early. Why? Well, because money is why you're here. Money is why you won't be here. And money makes it real. Right? When you start thinking about the investment, now it's real. So in our next coaching call, then we're going to talk about money. And that's when I'm going to connect you to somebody at the fran fun team, to Shirley, and she'll connect you to somebody on her team, because I want you to make not just the physical connection to how do banks loan money? What does it look like? But also the emotional connection. Because, like I just said, money makes it real. And I'm not afraid of your fear, your false evidence appearing real. I want that fear to bubble to the top as soon as we can get it to bubble to the top, because if it doesn't bubble to the top, I'm going to be, like, shaking you.
[00:06:45] Speaker B: Like, what's the matter?
[00:06:45] Speaker A: Are you thinking about what you're doing? Fear is a natural part of this process for, like, everybody. And so the sooner we can start recognizing it for what it is and working through it, the faster or the easier your process will go. So in week two of my coaching process, I would introduce you to Fran fun. And that's basically what she just said, the sooner the better. I most certainly do not want to wait all the way until you've booked your meet the team day visit, because you've in no way, shape or form demonstrated to me that you're emotionally connected to investing money. Talking is not the same as doing right. And so there's a lot of psychology that's going to go into this process here, not just like the physical steps. So with that little tangent, sorry, Shirley, this is your show, not mine. Let's now talk about. So someone comes to you, can you just, without giving away your, maybe your secret sauce or whatever, but can you talk about high level, sort of what some of the options look like and what are the popular ways that the majority of people you guys lend money to or you guys help get money are doing it today?
[00:07:52] Speaker B: Sure.
[00:07:53] Speaker A: Sure.
[00:07:53] Speaker B: And I think we can kind of break them into categories. We have business specific funding methods, and then there are personal strategies that folks use to come up with the capital that they need to open their businesses. So when we talk business specific, I would say there are two main programs there. One we've talked about a little bit, which is the idea of approaching a bank and borrowing money to help cover startup costs, help get things up and running. Banks today, and really for decades now, are very, very dependent on SBA loans specifically. So when you hear folks talk about SBA loans, it does not mean that the government is lending money for folks to open businesses. The money still comes from traditional banks and lending institutions. The government provides the bank with a backup guarantee so that if the business, and then if you as an individual are not capable of making the payments that you promised to the SBA, the Small Business Administration is going to basically transfer a large chunk of that loan from the bank to the federal government. So it's a safety net for the banks. Right. They know that even in a worst case scenario, they will be getting most of their money back. So that's why when you hear folks talk about business loans, they're almost exclusively talking SBA loans. The banks have just become really dependent on those guarantees. The other really popular business specific funding program is an IR's program that's called the Rollover for business startup. It gets the very unfortunate acronym robs, R O B S. So one time the government gets creative, and that's where we land.
[00:09:29] Speaker A: But we're robbing the IR's here, right.
[00:09:32] Speaker B: What this unfortunately named program does let us do is access money that folks have in a 401K from a previous employment relationship or maybe an IRA that they've rolled retirement dollars into. And essentially, instead of having that retirement money invested in Disney stock, you can take that money and without paying income taxes or early withdrawal penalties, invest that into the stock of your small business, your franchise location.
So we see those two programs being very widely used. It's actually really common to see a combination of those two strategies together. So maybe we're accessing some retirement money to meet the liquidity requirements that come along with an SBA loan, and then go get that traditional small business loan for the rest. So I'll pause there in case you have any questions on kind of the business specific side of things, but I would say those are the two main programs on that side.
[00:10:29] Speaker A: Hey, daily Coach fans, if you're loving this episode, please do me a quick favor and leave me a five star rating and a short review. Your feedback fuels my growth and rankings and shows others that this podcast is valuable. Now back to the show.
You know, the government loves small business. Why? Because small businesses create taxpayers. They create jobs in local communities, which creates more. Taxpayers, is all over. Lending money to create ways for people to start small business. So I'll just add that little two cent in, right?
[00:11:07] Speaker B: Yeah.
[00:11:08] Speaker A: Those of you who love the government like Kim Daley does.
Okay. All right. Yeah. And I see most of my candidates, absolutely, depending on what kind of, how big of a loan or how big of a project they're doing. But almost everybody uses seemingly, seemingly a combination of, like a 401k rollover. So let's just talk about that a little bit more, because for those who are not familiar with robs, I know your first reaction is more fear. Your first reaction, if you're typical, is touch my 401k. I've always been told never to touch my 401k. I'm not going to touch my 401k. So what I'm going to say is, please have the conversation. You don't have to do anything you don't want to do, but we just want to create options for you. And sometimes when you get educated about how it actually works and what you're actually doing, what you actually could earn on that money, versus what you're actually earning on that money, wherever it is, it becomes more reasonable to use the money. So with that kind of lead in, Shirley, jump off from there and tell us more about why there's so much resistance to using robs, but ultimately, why so many people turn the corner and go, wow, this is really the coolest thing ever. Yeah. Yeah.
[00:12:25] Speaker B: You know, I think a lot of it is just, we are all educated, and it's sort of ingrained in our brains to throw money in your retirement account and pretend it doesn't exist. You don't touch it. You don't look at it. It's not yours. Don't even pay attention. Which, okay, and that's tough, right? For those of us that have been in the workforce for 20, 30, 40 years to sort of get out of the back of your mind that like, hey, wait, maybe I could think about touching these dollars. So there's definitely just sort of a shift that needs to happen there. The bottom line is, you're not going to be making a decision about this program the first time that you learn about it. But the reason that you want to learn about it is because if you decide to use it, it's because you've done your homework, you've gone through Kim's process, you've done your due diligence, and you've arrived at the conclusion that if I take some of my retirement money out of the market and I instead take that money and invest it into my business, I believe that I am going to get a return that's just as good as, if not better than, what the market would have done with my money. So to Kim's point, it's well worth it to spend 30 minutes with me, 30 minutes with someone on my team to learn about it and really understand what your options are. And then I think that puts you in the best decision to really figure out how you want to move forward, you know, what's going to meet your goals and keep you most comfortable ultimately, yeah.
[00:13:43] Speaker A: The first time I learned about some of these alternative investment strategies, I had a lot of resistance myself. But I'll say today, I probably started down my. Well, I've been a business owner for my whole life, but in terms of taking, I used to do the same thing, put money into my self employed pension plan every year, max that out. And then I started meeting these alternative investors, people that had 2030, 40, $50 million net worths. They don't have any money set aside to pay tax on tomorrow when the taxes are going up, right.
They have money in circulation. It's about velocity of money. It's about how can I use money to make money on that money, right? So once I started getting around these people and I thought, well, they're playing a better game, so it takes time. And I'm not judging. It took me a while, but now I. And again, I've told this story before. In other shows, like, I had 1ft over here in my sep and 1ft over here in this alternative investing world and I was like, I'm going to tiptoe slowly.
And then once I started doing it and I started watching how I was creating passive income for myself using that money that I couldn't touch in my sep and now it's making money for me that I don't need to live off of. It's more cash than I need. So guess what I can do with that? Turn it into another investment and then make more money from that money. And it created this whole velocity of money effect where I was like, how quickly can I take more money out? What kind of tax hit am I going to take it out? And so it's funny, like, I'm just sharing my story because I totally get the resistance and it is an education process. Like this whole thing of coming to the idea of is owning a franchise. The thing for me, you know, is now, during a recession, the right time, like, these are all, if you're willing to go down these paths, these are all totally legit questions. You're just, if you work in this environment with me and Shirley, you're just going to be surrounded by people that know the other side of those questions and the fear that once we lower that with education, there might be an opportunity that's even better than what you've been taught or what you've been currently doing, depending on the outcome that you're trying to get to. So there's so many in the conversation.
[00:16:06] Speaker B: And I think it's just a lot about perspective too. A lot of when people start to learn about franchises, they're shifting the perspective that, oh, it's not just McDonald's, right? Oh, it's not just Burger King. Like there's a lot more. So there's that perspective shift. And there's a perspective shift of employee to becoming employer, right? Like, that's a big perspective shift. This is another one. When you really think about it, all of your dollars at some point become retirement money at some point in your life, you're not going to be working anymore and all of your money is now retirement money, right? That's how it works. Some of it you have paid taxes on already, some of it you have not paid taxes on yet. And so I think that perspective shift also just makes that conversation around accessing some of these dollars you thought you never would a little bit more palatable.
[00:16:51] Speaker A: Yeah. Yes, yes, yes. It's all education. Okay, so now let's just talk go back to the lending side again. So these high interest rates, like, at the end of the day, Shirley, I know the answer, because I've heard you say, I heard you say this. You said it to me kind of like, in passing, and I was like, oh. Like, it was sort of like, you said it so nonchalantly, and it hit me, like, a ton of breaks. I was like, oh. So at the end of the day, with these higher interest rates, like, what is it doing to most monthly business loan payments?
[00:17:23] Speaker B: Nothing earth shattering. So if you borrowed $200,000, if we just kind of use that as a sample, the difference in the interest or the difference in the full payment, I should say in a 1% difference in interest. So in either direction is less than $120 a month. So the thing that I often say to people is, listen, if $120,000 a month is detrimental for your business, we have way bigger problems than whatever's going on with the interest rate, and it is just a cost of doing business. No one wants to pay more interest than they have to. No one wants to pay more interest today than they were a year ago. And that's all very real and valid, and I understand it, but at the same time, I don't think that that's enough of a hurdle to say, oh, now is not the right time to start a business. I don't want to pay an extra $120 a month in interest like that. Math doesn't math. So I think it is just really kind of pulling the emotion out of the interest conversation. And it's hard because we all get attached to really low mortgage interest rates, and we get used to these consumer rates that have gotten close to zero at certain points. That's never been the reality for business loans. Right. It is just a different risk assessment for these lenders. But at the same time, even when rates are higher than we want them to be, again, not an astronomical difference in the operation or the profitability of your business. But at the same time, it's important to note that SBA loans are variable rate loans, and we're all, depending on what headline you read, hearing that rates should be coming down at some point this year, right? Like he mentioned, we're in April of 2024 right now. So the expectation is the prime rate will be going down, and that will end up impacting these SBA loans at the following quarter. So just because we don't love the rates where they are in this moment doesn't mean that they have to stay there forever.
[00:19:12] Speaker A: Hey, daily coach fans, if you're ready to begin your own journey to find the perfect franchise. Please email me right now at enquireimdaily tv. My services are totally free for you. That's enquiremdaily TV. Now back to the show.
And also doesn't mean that if you come in and they're low that they're going to be low forever either. What if you took a business loan at the lower rate and now it's where it is today? Like, you have to adjust to that either way. I didn't realize it was a variable rate loan. It is. It is.
[00:19:52] Speaker B: So if we. A lot of times the conversation that I'm having with folks about interest is, what did things look like pre COVID. I probably shouldn't even say that word, but. Right. What did things look like in the beginning of 2020? I would have told you that we're not quite three points higher right now than where we were then. And if you think about what has happened in that last four year timeframe, not being three points higher than where we were then is really not that bad. I mean, ultimately, I think we're okay. And again, we hope that they're coming down. But you're right, it is sort of a rollercoaster when the rates are going up and down. That does impact all of these business owners or loan holders, I should say.
[00:20:31] Speaker A: Personally, when you say it to me that way, I'd rather be working my business plan with a really high interest rate, knowing that rates are on the way down and it's only going to get better for me versus is coming in when they were really low and now having to adjust to that additional payment that I wasn't thinking about and maybe didn't have to think about for a couple of years. So, like, when you say it like that, I'm like, oh, wow, maybe it's the better time to. To be looking for a loan. So. And I want to. I want to go back. You did correct it, and when you were fully explaining the additional payment, you said 120,000. She meant $120, and she gave that. Yeah, 120,000. Yeah, we would like. Okay, timeout. No more loans.
[00:21:16] Speaker B: I'd be a little less casual about that, I promise.
[00:21:19] Speaker A: Yeah. I mean, roughly $100 a month. I mean, that's $1,200 a year. If that's going to deter you from pursuing your dream to be a business owner and have full control over building your own financial future, then, okay, fair enough. It just probably isn't the right thing for you in general. So in general, yeah, that's a really good way to sort of end that part to the SBA. So today in this quick episode, we've talked about why now is the right time. And I think I've just convinced myself now may even be a better time with a variable interest rate diving in and shopping alone. We've talked about the process, when to get started. Now is the time to get, and the sooner and the earlier in your due diligence to get with someone like Shirley. So it's real, but also so you understand. Like, one thing we didn't say was, the faster you understand what you can afford and what that means to you. I think it helps people make decisions, because sometimes a business that you think you're really interested in, when you realize the lending part of it, you're like, oh, maybe that's not as attractive to me as this other option is where I don't have that big loan, or the opposite. You're like, I don't know. That's a stretch for me. And then you realize, but I only have to come to the table with 80 grand, and the bank's going to loan me this money now it becomes even more attractive to you. Right. So this is also part of the reason I want you to meet Shirley early in the process so that you can really understand. Again, we're not making decisions. We're just getting educated and adding the funding to your process because it's as important to the selection of your business as any other part of this process really is.
[00:22:56] Speaker B: Yeah.
[00:22:57] Speaker A: Yeah.
[00:22:57] Speaker B: I fully agree that information and education can only make this process more successful for you. Regardless of what your answer is, in the end, you will jump to that conclusion. You will reach that conclusion in the best way if you get your hands on the best data.
[00:23:11] Speaker A: Yeah. Excellent. Now, a little small plug for Fran fund. I'll say this. There are options. Other companies out there like Fran fund. The one thing that earns my. That has earned my respect over the years in knowing Shirley and, you know, her representing fran fund is that she doesn't just, I'll say it like this, do a deal to do a deal.
I love the integrity with which she has come back to me on occasion and said, we could do this, Kim. But just because we can do it doesn't mean we should do it. And knowing that, look, we want to help you say yes to a business. We all want to make money by helping you get into a business. But we all want to help you do something good for your future, not just to make money. So that is why brand fund surely has become my number one lender. When I talk to all of my candidates, they all go over to Shirley and brand fund, because once you are on the inside track and you see how different companies operate and what kind of integrity they have or don't have, for me anyway, it's what matters. And so I just wanted to offer that little plug to you, Shirley and Brent Hun, because I appreciate just how much integrity you have as a company.
[00:24:33] Speaker B: Thank you so much. We appreciate that. We, if the right product for a candidate is a product we provide, we want to be the company that provides it. But our first order of business is let's help you find your best path forward. So, you know, I do think that we try to keep that focus in mind with every interaction.
[00:24:51] Speaker A: For sure. Perfect way to end this awesome interview. Thank you so much for being my special guest again here today on Kim Daily TV.
[00:25:01] Speaker B: Thank you for having me.
[00:25:02] Speaker A: She's my girl. Okay, for those who are ready to begin your journey into exploring the perfect franchise, to figure out if there even is an opportunity for you, you know that I want to be your franchise consultant, your daily coach. Please follow the email on the screen right now or reach directly out to enquireimDaily TV. That's inquireimdaily TV. And until next time, my name is Kim Daley and I want to be your daily coach.
You can find more content just, just like this on my YouTube channel at Kimdaily TV. And if you're inspired to take the next step to explore franchises matched to you, please email me right now at inquireimdaily TV. That's inquireyimdaily TV.
