Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Getting a Franchise Loan Is Becoming Harder

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Getting a Franchise Loan Is Becoming Harder

Article excerpt

NEW YORK -- When Rick Kimsey decided to start a business, a franchise seemed like the best way to go.

Buying a franchise -- in his case, a Doctors Express urgent care facility -- meant he didn't have to start from square one. The business came with a concept and a service to sell. Urgent care centers treat a range of common non-life threatening medical conditions such as colds, sprains, broken bones, rashes and stomach ailments -- usually without an appointment. For many people, the facilities are more appealing and less expensive than a trip to the emergency room. Mr. Kimsey just needed to get the franchise up and running, and then operate it. It didn't even matter that he had no medical training.

But what sounded like a great plan wasn't so easy. Financing for the business was nearly impossible to get in the aftermath of the 2008 financial crisis and the recession. He was dealt his first blow when his bank froze his home equity line of credit. Then six banks turned him down for a loan.

It took more than a year before he was finally able to close the deal.

The tough economy has made the prospect of operating a franchise attractive to the unemployed, to workers who don't want to wait to get knocked off the corporate ladder and to others looking for a new way to generate income. But first-time franchise buyers are finding it's harder than they expected to cobble together the money needed to get their businesses off the ground. Lenders are rejecting them because of their inexperience or because the franchises they're buying are relatively young and not as well-known as established brands such as McDonald's and Jiffy Lube.

Mr. Kimsey was attracted to Doctors Express because health care is one of the fastest growing franchise segments. He had spent nearly 20 years in the wireless telephone industry. He decided to leave that business because the mega-mergers in wireless meant it was getting harder to find investors for new ventures. When he knew that he wanted to open a franchise, he considered one that's technology-related, Batteries Plus, which operate stores that sells batteries of all kinds.

But "I was looking for a sizzling sector like cell phones were in the '80s," he says. …

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