The Franchise Insiders "Inside Scoop" Podcast
Jack and Jill Johnson are two of the most experienced franchise experts in the industry, and their podcast The Inside Scoop is a must-listen for anyone considering investing in a franchise. Here are five reasons why:1. Jack and Jill have over 20 years of experience in the franchise industry. 2. They sell franchises, so they know which ones are actually making money. 3. They're not afraid to tell it like it is - you won't find any boring interviews on this podcast. 4. Every episode is jam-packed with financials and data that you can use to make an informed decision about which franchise is right for you. 5. Their insights and observations about the franchise industry are incredibly valuable - you won't find anything else like it out there. If you're thinking about investing in a franchise, make sure to add The Inside Scoop podcast to your must-listen list.
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Email: info@thefranchiseinsiders.com
Text: 305-710-0050
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The Franchise Insiders "Inside Scoop" Podcast
Unlocking Franchise Success: Financing Strategies and ROBS Insights with Kelly Krueger
Unlock the secrets to franchise success with insights from expert guest Kelly Krueger, a senior consultant at Benetrends. Discover how you can transform your retirement savings into a thriving business with the Rollover as Business Startups (ROBS) program. Learn how this innovative financing option lets you invest pre-tax retirement funds into your franchise without hefty taxes or penalties, offering immediate capital and a long-term retirement strategy.
Join us as we explore the benefits and complexities of franchise financing, from the tax efficiencies of ROBS to the nuances of setting up tailored retirement plans within your business. Kelly emphasizes the importance of being a W-2 employee in your franchise and how to manage your salary flexibly. We also navigate the world of SBA loans, debunking myths, and highlighting the key borrower responsibilities and the impact of economic factors like interest rates on these loans.
Finally, we shed light on diverse investment strategies for aspiring franchise owners. Whether you're considering an SBA loan, a HELOC, or borrowing against brokerage accounts, we discuss the advantages and limitations of each. We reflect on the role of economic trends in shaping franchise opportunities, particularly in blue-collar sectors. With Kelly Krueger’s guidance, this episode promises to inspire and equip you with the financial knowledge to turn your entrepreneurial dreams into reality.
Text: 305-710-0050
Hi everyone, welcome back to the we Bought a Franchise podcast. I'm Jack Johnson.
Speaker 2:I'm Jill Johnson.
Speaker 1:And we are here today with a very special guest. We have Kelly Krueger, senior consultant at Benetrends. Hey Kelly, what's up? How are you?
Speaker 3:I'm doing well. How are you two?
Speaker 1:Great, thank you, we're doing good. So, for those of you that are tuning in for the first time, we're Jack and Jill Johnson. We are franchise consultants and last year we bought a franchise called Pink's Window Services and we thought it would be cool to sort of share our journey, our experiences, the ups and downs of building a franchise, and so we want to bring you guys a relevant content. We try on a weekly basis to do so, just kind of sharing our journey and what it's been like for us, as well as bringing on relevant guests to all of you out there that are thinking about franchise ownership.
Speaker 1:And, kelly, one of the most relevant things to buying a business is seeking financing, and that's really where your company comes in. You've helped countless numbers of our clients, whether it be with 1K rollovers or SBA loans. But, kelly, what I like the most about working with you is if you think a client has better options to take equity out of their home or some other option, you've always been very straight with them. Let's dive in and let's talk about financing and franchise financing and kind of maybe give us an overview of what you guys do and how you help people.
Speaker 3:Yeah, no thanks for that setup, jack. I appreciate it. I've been doing this for almost 14 years and Benetrends has been doing funding for small businesses and franchising for over four decades. So Benetrends started in the industry back in 1983, and they started as a ROBS provider. Many people don't realize that Benetrends did the first ROBS plan ever and they actually pioneered it, kelly can I stop you right there, yep, what is?
Speaker 3:ROBS. You know I get so used to using the acronym Thank you. It stands for Rollover, is Business Startup and the gist of it, and then I'll circle back and fill in the details later. But the gist of ROBS is that it gives you the ability to take pre-tax retirement funds and instead of investing them in the market and buying stock in someone else's company like Amazon or Coca-Cola, you can take that money and invest it in your own business without treating it as a distribution and paying taxes and penalties on the money. So Rob's has literally done thousands of times a year within franchising, Outside franchising many people don't know it exists, which is bananas Because, again, like we've been doing it since 1983.
Speaker 3:So the founder of Benetrends his name is Len Fisher. He's kind of famous for this really, because it was his brainchild and he is an ERISA attorney. He got this figured out. He worked with the IRS to develop the rules and regulations to bring it to people like you and I. We did the first ROBS in 83. And then over the years, Benetrends has expanded to be a one-stop resource for our clients. So we offer SBA loans, equipment leasing, fleet leasing, other types of financing. When it comes to lending, we're not actually the bank. We have dozens and dozens of banks that we partner with, so we've got a lot of capabilities there when it comes to loan packaging and shopping the best rates and terms for people. We can even write the business plan and do the cashflow projections if somebody wants that much help. So it's really up to the client to determine how much help they want from us in those situations.
Speaker 1:So how cool is that? So here you go. Most people who have a okay, they're working at a you know corporate America company and it's diversified into all these companies that they don't own or that they, you know, again, have a very small piece of now upon exit from your company because you have to leave the company, right? It can't be attached to a current employer, right? Kelly.
Speaker 3:You know, not always. Most of the time, that's true, jack. I'd say about 70% of the time, that's true.
Speaker 3:But, I run across probably 30% of the plans that will allow the employee to roll out a certain portion of the plan while they're still employed. So that's called an in-service rollover, by the way. So I always tell them hey, it's worth a quick phone call to your 401k provider to find out if you can do an in-service rollover, because that's not the same as taking the distribution, it's just rolling money out of their plan to like an IRA which frees it up for us so that we can use it for robs. So about 30% of the plans allow that. And then the other two situations are 99% of the time. If somebody rolled money into the employer plan from a previous employer, they usually can roll that portion out at least. And if they're 59 and a half or over, they can typically roll out also.
Speaker 1:Very cool. So here's the thing, guys. I mean, rather than putting it into, you know, a Jeff Bezos company now you can take your 401k and put it into a company that you own.
Speaker 1:So you know, let's say, for example, you're listening to this podcast and you want to own a pinks franchise. And let's just say, you know what you're, you're thinking that how great would life be starting in the new year. Instead of working for someone else, you can go lead your own team out there, build your own business. We can quit our job and take that and roll it right into our business. Or I mean, kelly, there is a whole sort of thing happening with white collar jobs and I'm sure you're seeing this.
Speaker 1:There's a lot of people who are very talented and have great resumes, but they're out of work. Meanwhile, this whole blue collar revolution with businesses like Pink's and like Voda, restoration and Rolling Suds, just to name a few, are thriving, and so what a way to kind of adjust with the market and take your money and take your time and put it into something that is so much more relevant. I just think the thought of that is so exciting. But there's one other piece of it, too, that I know you can do Is it that if I have at least a hundred thousand dollars in my 401k that I can borrow up to $50,000 from myself while I keep my job Is that? Is that also something?
Speaker 3:Yeah, typically K-plans will allow that, or 403Bs. Most employer plans will allow you to borrow up to 50% of the balance that you have in it, not to exceed $50,000. Okay, so that's another. You know there's lots of creative things, right, and that's part of our job when we speak to clients is to turn over all of the stones. You just can't take things sometimes at first glance right. At first glance it may look like gosh, I'm not sure that there's the liquidity here needed for an SBA loan or something like that. But if you keep looking and you get creative, then you say yes, there might be enough money in a 401k that you can borrow against to get the liquidity needed for SBA or SBA or different things. So you've got to keep digging sometimes because it's not just one method, right.
Speaker 3:A lot of people they combine different funding options to get to where they need to be. And I agree with you so much, jack, with what you said a few minutes ago about white collar people losing their jobs and we've definitely seen that trend. And truthfully, if I had to guess, I would say that 75% of my clients are 50 and over and they fall into one of two categories they have either been downsized from corporate America and they're struggling to find another position, or they're in corporate America and they can't stand it one more day, and sometimes people fall into both, and I've fallen into both many times. So it robs. It gives people an entry into business where otherwise maybe they wouldn't have it because they don't have the liquidity needed. A lot of people don't have the cash sitting in the bank, but they have retirement funds that they can use.
Speaker 2:I love that. I think when we, you know, when we're talking to clients, I mean a lot of people just don't think they have the money to do this because they're just looking at their savings and you know they don't realize all the different avenues and so we're always so happy to send them over to you. You know they're like you said. There's so many options. You can combine options. There's things they probably have no idea that they've even had, and it's so important to know that that exists, because I think a lot of people just shut down the idea because they're looking at, you know, they're checking in savings and saying I just don't have the money, but they might have it and have the ability to do it elsewhere, whether it's through funding or through like a okay or anything like that. So it's so helpful to have you as a resource to do that, because there's so much more possible than most people think.
Speaker 1:Yeah. So Kelly does a 401k then roll back After a certain amount of time, do we have to roll that money back into an account?
Speaker 3:Are you asking if it's a loan that has to be paid back?
Speaker 1:Yeah. So this is something that I've always been curious about. If we do the 401k rollover right let's say we've got 401k in the 401k and we roll it over to fund our business After 10 years, does a certain amount of that have to go back into the 401k or once it's out, it's out?
Speaker 3:I love that question. So ROBS is not a loan. You're never required to pay the money back that you invested into the business. So that's one of the big benefits of it. Also, right, because you're not strapped with monthly payments back to the bank. The cost of capital is less because you're not paying interest rates, so you don't ever have to pay it back. The only thing that you have to do is ROBS is not meant to be a one and done, right.
Speaker 3:The IRS doesn't want to think that we set all of this up as just a one-time transaction to fund the business. So they want to see you use it as a retirement savings vehicle, and I always want my clients to understand that. Yeah, the purpose of ROBS it's dual purpose. So on the front end, it's fantastic because you're gaining access to money that hasn't been taxed, so you get thousands of dollars to invest in your business day one, instead of just handing that over to Uncle Sam. But on the back end, it's really intended to be a retirement wealth building strategy.
Speaker 3:So, even though they don't have to pay the money back, of course everybody wants to rebuild their retirement plan and the whole reason they go into business ownership is they hope they can build it back even better, right. So where we shine, we can design any type of plan traditional, traditional, from case we're all 401ks, profit sharing plans. So we will design the plan that has the most tax benefits for the client, based on what their business is going to be, how many employees they're going to have. And then, as their business grows and their needs change and they need to shelter more money, then we add plans or we shift and we adjust with them, but we always have the intent in mind of developing the plan that gives them the most tax advantages. So when they do start paying themselves a salary which they can do day one once we get this set up if they need to take a salary right away, they can.
Speaker 3:But when they start contributing back to the plan and becoming profitable any money that they put back in the plan, they're just going to work through the. You know we set most of our plans up at Fidelity, for example. So they'll work through Fidelity's platform to invest that money back in the market however they want. So that money that they're putting in the market will be growing in Amazon, coca-cola, whatever they want, and then they're also holding their company stock within it as an asset. So as the value of their franchise increases, the value of that stock held within the plan increases too. If the business does as well as they expect, then they should get an excellent ROI invested in their own business as opposed to just being in the market.
Speaker 1:That's great. So what happens if because there's different types of franchise buyers, right? So there are owner operators who I think you know, drawing a salary from day one for an owner operator makes a ton of sense. But what if you're more like how Jill and I run our pinks, where we have a GM and we're kind of scaling more towards the long haul, meaning that you know we're not using pinks in your one or your two as a profit center. We don't draw a salary. We're not a C-corp or an S-corp. Is there an option with ROBS for me to say, listen, I'm going to hire a GM and I'd rather dedicate a salary to that GM right away, or do you have to pay yourself a salary when you do ROBS?
Speaker 3:Well, when you do ROBS, you do have to be. Robs is not meant for just passive businesses, right For completely absentee. So we do want you to be a W-2 employee of the C-Corporation from day one, but you're not required to take a salary immediately. You can, and some people need to, right, because they don't have any income. So it's great for the people that need it. But for those that don't, you can absolutely wait until the business is profitable and can afford to start paying you. So you can pay the GM first, right, and then you know, then wait a little while and until you start paying yourself. But we definitely do want the owners to start taking a salary when we feel like the business can support it. Something reasonable.
Speaker 3:That makes sense, yep, because we're always thinking we're always thinking about compliance right. Everything that we do, it's with our eye on it, making sure that, if the IRS ever looks at anything, that we have every T crossed, we have every I dotted and that we're not blurring any lines.
Speaker 2:Yeah, I just think that's so helpful for new business owners, you know, because it's such an unknown and you know Jack pays way more attention to the financial side than I do, and so but you know, but I'm not, I'm the norm too. You know, there's a lot of people out there that don't know all these things, so to have you as a resource is is amazing because you know they're just things that most, some of us don't even really think about, so Most people don't, and I love that you said that, jill, because the majority of my clients they've never done this before.
Speaker 3:They've never even thought about business ownership.
Speaker 3:They weren't thinking about building an empire. They found themselves often in a situation that they've been downsized and then all of a sudden they're starting to look for other opportunities. They don't know what funding options are available. They don't even know what they have, if they have an IRA or a 401k. So I'm very used to that and I welcome those conversations right, because for me I think there's nothing more rewarding than taking somebody who's novice and kind of maybe a little anxious and not sure that they can do this, and talking through and helping educate them on all of the options that are available to them so that they can see that they actually do have a path forward and that we're all going to be there Benetrends myself, you, the franchise that they've got a very professional team in place to help guide them every step of the way, and it just makes it so much easier for them to just focus on the business and the plan that everybody put in place. All they have to do is follow all of the steps and then go make a lot of money.
Speaker 1:Yeah, and the um, with the new old administration coming back in, putting all politics aside. But from a taxation standpoint we're all set up to do that.
Speaker 1:Let's go make money because you're going to get to keep so much of it. Um, and you know, kelly, I'm so glad you said you said it kind of the way that you did because you know there, there and this is where you always need to make sure you have a good team, like Benetrends, have a strong, you know CPA and accountant, because, you're right, you want to make sure that you're protecting yourself from audits and things of that nature and making sure that you are drawing a salary as an owner as it makes sense as the business starts to get into that zone of profitability. But as we talk to most of our clients about, that first year or so is about building. Now I say that and we just found out that our client, catherine, who owns a soccer stars, just won MVP for highest system revenue and she's only a year and a half in Wow.
Speaker 1:So there are those fast starts. Like we've got another client that did a um, a roofing franchise, and he's already had like a huge you know seven figure offer for his business. So things can happen fast. But our guidance to most to to our clients is expect that those first 18 months are about building and if you're going to be in our shoes, where you're going to be kind of running the business from the top end and empowering a GM to really help you with the day to day, you know you want to make sure that that person is excited to work for you and pay well.
Speaker 3:Well, to touch on something that you just touched on, the 18 month thing, yeah, we always want to overcapitalize people, right? We don't want anybody going in just by the skin of their teeth, because you want to expect the best but plan for the worst. And so the one thing I tell people is that you know you can fail in business for a whole heck of a lot of reasons, right, but having access to too much working capital isn't one of them.
Speaker 1:Right.
Speaker 3:You're never going to fail because you've got too much money for the business.
Speaker 1:No, no one ever went out of business for being overcapitalized.
Speaker 2:We tell our clients the same thing. It's a similar trend, but it's important to know. It's important to know what you have what you can do, and I love that you err on that side too, because it's the same advice we give them. We don't want you stretched too thin. So if this isn't the time, this isn't the time, that's right.
Speaker 3:That's right and you know that's an important thing too, jill, because you know people don't know what they don't know and if this is the first time they've ever looked into business ownership just like if you're planning to buy a home or different you know things. You don't. You don't just buy a home overnight, right, some people have to save, they have to work on increasing their credit. You make a plan once you know what's going to be required. So franchising for some people is the same. You know. Once you know what's going to be required, then you can put the steps in place. So, yeah, maybe six months or 12 months down the road, or even two years. I have people come back two, three years later and then they're ready. You know it's all about, like I said, educating people and kind of you know what their options are or what they will be if they take these steps.
Speaker 2:Yeah, I love that. We were guilty of that when we were trying to buy our first. We didn't know what was going on and it took a good sit down to figure out all the things that we needed to plan for and fix and it was like a huge learning opportunity for us. But you're right, I mean we kind of went in as young kids Okay, we have some money, let's buy a house. And we got a tough lesson.
Speaker 1:Yeah, they laughed at us.
Speaker 2:It was a combination of us with just things that we didn't realize we needed. I didn't realize they needed to have more credit. I was proud of myself for paying off my credit card bills, but I wasn't establishing any credit by doing that. That's an eye opener. I had no, I thought I was doing everything right. So you know it was. It was really important to have that meeting and understand so that we could then both of us together fix the things we needed to fix and get to a point where, when we bought that house, we were fix the things we needed to fix and get to a point where, when we bought that house, we were, yeah, we we hated this mortgage guy that we met.
Speaker 1:He was such a he was not the nicest man on earth, but he gave us some real hard math, as Jill says, but things to sort of understand in terms of how people look at you, in terms of approving you, and he gave us some good guardrails that have helped us as entrepreneurs, because sometimes you got to do what you got to do to survive, to grow, to thrive, and so there are always to your point, kelly, I think having those aiming points. We always need those aiming points. What do I need to do to get the business? Now, once I get into business, where do I need to go?
Speaker 1:I was just on a Pink's weekly sales call where they're speaking to all the franchisees and just saying, look, guys, take the time to set your goals for next year. Where do you want to go on a revenue standpoint? And, of course, these are things Jill and I have been doing this for years. We always know where we want Franchise Insiders to go. We know where we want our Pink's franchise to go.
Speaker 1:But that's part of the value of a franchise is whether you're seasoned entrepreneurs like us, or your first time entrepreneurs like the ones that you've talked about. The franchise is going to help crystallize those things for you, and I love that, because when you're talking to people and experts like you or like our mentors at pinks, they're there to cover all the bases, just like you do. And so, to that end, kelly, I have another question for you, which is, let's say, I fund my franchise through a Rob's and I do my 401k rollover and then, five years from now, I get an amazing offer to sell my business. Are there any I's I need to dot or T's I need to cross if I'm selling my business and I funded it with my 401k rollover?
Speaker 3:Well, I mean it just depends on because when you sell the business, the proceeds of the sale are going to go back to the shareholders. So if you fully funded, 100% with Rob's and in the retirement plan, is still the only shareholder when you sell, then the proceeds of the sale are going to go back to the retirement plan. So I think that is one key thing to know because you know, when you're my age and you're closer to retirement age, closer to 59 and a half, where you can access that money without penalty, then for me I want it to go back into the plan. But some people are younger, right, we've got young entrepreneurs and maybe they're 40 years old or 35 years old when they sell the business, so maybe they want that money in their pocket to do something else to travel the world. So I always tell people that you know you don't want to wait until you're ready to sell the business to start thinking about how you're going to sell the business and start thinking about exit strategies.
Speaker 3:I do think that once you get up and running, those are conversations they want to start having with, like their CPA, their legal counsel, to determine what their five-year plan is, what their 10-year plan is and again, we know that the best laid plans.
Speaker 3:Yeah, you're planning for 10, 15 years and you get an offer you can't refuse at five. But I think you make the plan of what you expect to happen and then you start putting a plan, you start working backwards right With your kind of CPA to put a plan in place to get you to where you want to be. And for some people again, if they're young and then maybe they want to start buying the stock back from the retirement plan a little bit every year so that they completely buy out that investor called the retirement plan. So when they sell, the proceeds go to them right, because it's easier to buy that stock back incrementally over time than it is to buy it back all at once. You've got to have the money to do it. So those are the things. I think you it's never too early to really kind of start thinking about the end game and working backwards.
Speaker 1:And so for all of you out there, when you do that 401k rollover, it's a mandated C corp, can't do an LLC or an S right Kelly.
Speaker 3:It is a mandated C corporation but you can change it along the way.
Speaker 3:It was sort of like I was just saying if you want to reverse the structure you have to be a C corporation as long as the retirement plan owns stock in the company.
Speaker 3:So if you want to reverse that, then the corporation buys back the stock that is sold to the company and it has to buy it back based on a current business valuation, which typically runs somewhere between $750 and $1,250 to get one of those. So whatever that comes back as that's what their corporation is paying back to the retirement plan to buy that stock. So hopefully the business is doing well and the corporation has to pay more. But it's going back to the client's retirement plan and they're rebuilding the retirement plan and at any point the retirement plan no longer has an investment in the business. Then they can revoke that C-corp election if they want to and they can change the entity to anything they want. If they want to keep the retirement plan in place, we will, and if they don't care about it, then we shut it down and anybody that has money in it just rolls their money to an IRA wherever they want.
Speaker 1:Great info, awesome info. Okay, so I think we've covered a lot on the ROBS program, which Kelly and her team are excellent. Kelly, I think every single year, we must help at least 10 people with you guys At least. Yeah, very popular way to sort of fund a business and I feel like, with what's going on in the market, we'll probably see quite a bit more in the coming year. So, for all of you out there, if you do want to connect with Kelly, kelly, where can the folks find I'm not ending the podcast, but it'd be good for people to know where they can. How can people reach you?
Speaker 3:The easiest way really is via email because I'm typically always glued to my computer so I see emails and respond to emails. The fastest and the easiest email I've got a couple of them. Kelly K-E-L-L-Y at BennettTrendscom is the easiest way to get me.
Speaker 1:Very cool and, for those of you longtime listeners, if you'd like to start with us first, you can just text us 305-710-0050. Kelly, let's switch gears and let's talk about SBA loans, because that's probably number two. Maybe it's number one overall, I don't know. But in terms of when we work together and sometimes people even do SBA 401k combos, let's maybe just give people a quick overview of what an SBA loan is and where you see the market right now, and maybe we'll take it from there.
Speaker 3:Yeah, no, I love that question, especially where I see the market right now. There's so many things I have to say and I'm going to probably forget half of them. But SBA stands for Small Business Administration, so that is just a government agency. Sba is not making the loan. The banks make the loan. Sba is just the government agency that guarantees the bank that if you default as the borrower, they will reimburse the bank a certain percentage of what they lent. So a lot of people have the misconception of oh, I want an SBA loan because if I default I don't have to pay it back. It's government guaranteed, I'm off the hook. It's like that's not the case. The borrower has to personally guarantee that loan. Sometimes they have to put up collateral, sometimes they don't, but they're always personally guaranteeing it.
Speaker 1:What's the guardrail? Is it over? It attaches to your assets if it is over 500,000 or over, correct?
Speaker 3:Yeah, the minute you hit 500,000, then the bank doesn't have a choice. Sba mandates to the bank that if there's collateral available they do have to capture it, and typically they're looking at equity and property to put a lien on a property. And if it's under $500,000, then it's up to the bank. If they want to do the loan without collateral, they certainly can, and some banks will still require it. Right, it just depends on the strength of the borrower. It depends on how well established the franchise is, and there's a lot of things that go into it. But we see a lot of people these days under 500 that are getting away without collateral if they're strong borrowers.
Speaker 1:So yeah, go ahead. Yeah, no, and I know you have a lot you want to cover, but I did have a question for you that I may or may not be correct in my assumption, but it feels to me like the SBA Express Loan, which is a lower I think it's $150K. Is that still a thing? Is the Express Loan still?
Speaker 3:a deal.
Speaker 1:It is, yeah, it is still a thing Does that fund faster than say the. What is the $500K? Is that a $500K?
Speaker 3:All of them and this is a big misnomer. So I'm glad you asked Jack, because all of them are 7As, even that express loan is still a 7A. The difference with it is that it's really meant as a working capital loan. It's not intended for businesses that are brick and mortar. So when you don't have brick and mortar and you don't have leases and renovations and things, then yeah, it's not as complicated and it typically funds a little bit faster.
Speaker 1:So do you see a time because I feel like over the last year, anytime we've done any of those 4K loans for multi-unit franchise owners that those have taken like three to six months, whereas the DKSB Express has been a lot faster, maybe 12 weeks. Am I right or wrong in that sort of assumption?
Speaker 3:Yeah, you're completely right, because when you have brick and mortar, oftentimes the biggest challenge that creates delays is finding a great location right, and you can't complete the process with the bank until you have the location and you know how much you're going to get in leasehold improvements and what your monthly payments are going to be. So they can take you all the way up to it, but you're really kind of stuck until you have that figured out.
Speaker 1:And any of the Fed rate cuts do those affect the SBA rates as well.
Speaker 3:They sure do. Sba loans are adjustable rate loans that move with prime. Prime right now is at 7.75%. A few months ago it was at 8.5%. So we've come down I think three times, two or three times, I can't remember. It's all a blur now, but since I don't know, end of summer or so, we started dropping a little bit. When the prime adjusts, the borrower's rate will automatically adjust with it the following quarter, like the first of the following quarter. So all of our clients that have SBA loans, yeah, they've come down like three-fourths of a percent here recently.
Speaker 1:Yeah, Okay. So let's and I hope you don't mind me kind of bouncing around a little bit- here.
Speaker 3:Go right ahead, it's your party.
Speaker 1:I mean, listen, I'm trying for our, for our people out there, our clients who are thinking about buying a franchise or adding another franchise. Let's take pinks, for example. Oh, their estimated investment, hang on, let me make sure I get this number right. I'm just Kelly, I'm moving over to my screen here where I can look at total investment for and it's not working. So we're just going to, let's say so, let's say all in investment for PINX is 150K, 60k of it for a franchise fee and then 90K for working capital. That's what they're saying. And let's say their item six, right, so that fits neatly with an SBA Express loan of 150K, what are the minimums I should have in terms of if I want to do that credit score, cash on hand and any other sort of particulars. What are you guys looking for to approve someone? And I know it's not just a straight line, but maybe just some basic guardrails there.
Speaker 3:Yeah, and I would say it definitely isn't a straight line because we have so many banks that we partner with and our SBA team is constantly bringing on new partners and I can't even keep them straight. We'll be on a meeting and they're talking about this loan and that loan and I'm like, when did we get that? And so they're constantly testing out things before they roll it out on a big scale. But you know, in general if you're doing that 150 Express loan, they require about an 11% cash injection. So it's easier to say 10%, but technically I think it's about an 11% cash injection. The client they'll loan you the full 150, but the client is injecting just over 16,000 of their own cash and that goes towards the franchise fee. It's not in addition to it. Anytime you're dealing with an SBA loan they don't fund 100% of it. The client always is going to have some skin in the game, so the first thing their skin in the game goes towards is the franchise fee.
Speaker 1:Okay, and therein lies just the beauty of the current franchise system, because here you have our friends at the FTC that put a lot of very sort of strong rules in place to what we can and can't say in terms of helping franchisees figure out what a business will actually make right? I was just talking to a new franchisor about this yesterday, which is you've got to live and die on that item 19 and you cannot go outside of it. And then you want to go get your loan and the poor franchisee is saying, well, here's the item 19 and the item six, and this is what I got to go off of. So it's an interesting part of the whole franchise landscape where the franchisee sometimes has to figure some things out on their own.
Speaker 3:Indeed, and that is where I would say, our SBA department really brings a whole heck of a lot to the table in situations like that Because, like I said, we've got different packages we offer. You can even go a la carte over here if you want to use your own bank, but you want us to write your business plan or do your cashflow projections. So we're experts in that? I'm not, clearly, I think we've established that but but our team is experts when it comes to cashflow projections and things, and you know they can. They can completely do them, like they can provide guidance or they can completely do them for the client.
Speaker 3:So I think you know we offer an elite package where they do the cashflow projections and the business plan and it's like a beautiful 35, 40 page business plan. They do the demographics, the research, everything super professional. So that's not everybody needs that, right, but some people, they have the knowledge to do that themselves, but they don't have the time, they don't have the bandwidth, they're in corporate America, they're working a lot of hours, and so for the people, that it's a benefit and we can take that off their plate and give them their time back. It. Um, it reduces some of the kind of stress that you may feel while you're trying to juggle all of these things getting the business up and running, getting funding, working a job. So you know there's there's a lot of different things that we offer, based on how much help the client wants.
Speaker 1:Yeah, well, and what's cool is we talked about this on the podcast. I've talked about it a lot. We did a a, a figure, a home equity line of credit from figure lending, which is now this online deal where you can. You can fund in like two weeks.
Speaker 3:Yeah, you told me about that one.
Speaker 1:Yeah, and and I think we had a client just recently do it a couple of clients and, by the way're not affiliated with figure lending we just used it. We personally used it, we liked it. I'm I'm a person that prefer, you know, speed and less phone calls, and so when, when we found out about, I'm like and they say they can fund in as soon as five days in some cases, but the the difference here is that with figure, they mandate that you, if you're taking out, sayk, you can't just take 20K of it. You got to draw the whole 200K down, but you could then put that 200, let's say, or you could put 100K back and then draw from it. So, kelly, I know a lot of times you recommend that people also consider utilizing their home equity. I don't know if you have any other thoughts on that, but I thought that was really cool.
Speaker 3:Well, I think that is really cool and I am 100% on the same page. I always look for what is going to be the fastest, the easiest and the most economical, and it's not always working with us right. It's just, you know, because SBA loans they have a place and sometimes it's the only option, but sometimes it's not the best options. You know, a HELOC when it's an appropriate option for someone, it's either usually going to get a little bit better rate, it's going to be faster and easier. And then another option that a lot of people don't even know about if you have an after-tax brokerage account right, we're not talking 401ks or IRAs, but just a Robinhood account like money in the market, after tax brokerage funds and you have over 100,000. Oftentimes you can borrow against those, take a line of credit or a loan against them, and what I like about that is that they don't make you sell off your investments so you can keep the money in the market working for you. They're just going to use your account as collateral and lend you against it, and that is fast and easy too. Your account as collateral and lend you against it, and that is fast and easy too, and the rate sometimes is much better than SBA. Sometimes it's a little higher if they don't have a lot of money and they count it. It really just depends, but it's fast and easy and it's one of my favorite ways for people that need to borrow money to get it.
Speaker 3:And, like you said earlier too, jack, oftentimes people are combining options right. It doesn't just have to be one thing and you had mentioned trends earlier the trend that I've seen over the last three years, since the rates have gone up so much, I've seen a lot more people either funding 100%, fully with ROBS if they have the ability to comfortably do so without feeling like they're tapping out all of the retirement funds or using more in retirement funds than they would have so that they can minimize what they're borrowing and minimize the monthly loan payment and minimize what they're paying in interest. Five years ago, when they were giving away HELOCs at two and a half percent, everybody was doing them right. Why wouldn't you? So it is definitely interesting through the years to see the trends, because how people are funding their business is a direct correlation of the economic climate and one of the things that I am super excited about with yeah, not to get political, but when you talk about the new administration and the kind of the differences in taxation that we can expect.
Speaker 3:We've heard them say that they're going to reduce the corporate tax rate to 15%, and right now so that affects Rob's clients because Rob's with a C corporation it's a flat 21%. Right now. Across the board Federal tax rate is 21%. If they reduce that to 15%, that's massive and it was massive for industry when they reduced it the first time, right From, I think and this is a long time ago, so my memory may be failing me, but it seems like they reduced it from 38% down to 21% and now to go down even further. I'm, like I am I'm pretty excited about that.
Speaker 1:I mean, yeah, I think you've got the numbers right. I was actually just talking to our son about this. Yesterday we were driving to school. Yeah, we had this whole conversation about you know.
Speaker 1:Republicans you know, I mean, look it's, it's, it's for those of us that are small business owners, those types of things. I was telling him. I said, look, we can take that, that money we're saving now on taxes and we can, we can empower, we can add more jobs. Right, we can give more people jobs. We can pay our team more money. I think it just creates for business owners just a great thing and a great way to continue to grow for those business owners. And, let's face it, the most successful business owners are going to continue to reinvest in their companies. They're going to advertise, they're going to put that money back into the um, into the into the.
Speaker 3:It's so true, and there's a lot of optimism right now. I don't know about you, but I just feel. I feel that people are extremely optimistic about what's to come right and about the future of of business and people thriving, and I think we're running, we're rolling into some very exciting times and I can't wait to see 2025, 2026, how this all plays out.
Speaker 1:Yeah, Well, think about this, Kelly. Right now houses are really expensive and the rates are still pretty high, and it used to be. You know, when I was a kid, when you'd hear about that one guy that had an uncle that owned 50 McDonald's, you know it was like, oh my God, you have to be rich to be a franchise owner. Now you can fire up a home services franchise for 150 K.
Speaker 2:You can't buy many houses. There's not a lot of options at 150 K right now Right, but there are so many friends.
Speaker 1:Let's just take the home care industry, for example. Most of those items across the board, from senior helpers to Hallmark home care to you know, home well care services, they're all a million and above on their item 19s. And, by the way, this is not an offer to sell a home care to you know, home well care services. They're all a million and above on their item 19s. And, by the way, this is not an offer to sell a home care franchise. But like, look at that and most of their and you know you probably fund a lot of of home care businesses. It's a super low investment. It's a highly scalable business.
Speaker 3:What we do is so fun, right, To be able to help people realize their dream, and I think that there's nothing that gives me more delight than helping somebody get out of corporate America, because I came from corporate America, like you did, and I couldn't stand it. I was not cut out for it, I didn't. I mean, it served me well for a while, but I found that you know, when you're, when you're a very hard worker which all business owners are it needs to make sense, right? If I'm going to put in 12 hours a day, it needs to be sensical. It can't. You can't just be burying me with reports to justify your job and then I'm so tired I can't even do mine.
Speaker 1:So, yeah.
Speaker 1:I mean Kelly, there's so much that we've covered and there's probably so much more. I, I mean Kelly, there's so much that we've covered and there's probably so much more. I'll tell you what I, what, what Jill and I tell our clients, which is when we have an initial consultation with them. We always make a very strong recommendation that they talk to a professional like you. One of the questions we ask is you know well, what do you think you can invest in? A franchise? Some people know and some people don't. Some people don't want to get into that with us.
Speaker 1:They want us to work on the match, right On the on the franchise match, and so what I'll say to them is look, let's connect you with Kelly. You guys can have a confidential conversation with Benetrends, it doesn't cost you anything and you can figure out what your investment universe is, because, kelly, you're always so honest and transparent with our clients. You can figure out what your best resources are, and then Kelly then typically comes back to us and says look, from a top level, here's kind of the universe, and so it's a nice way for you to stay really sort of safe and confidential with us. You can learn from an expert and together, between us and Benetrends and Kelly, we can figure out what the right franchise investment strategy is for you based upon your personality, your strengths, and what you can invest while keeping you safe is for you based upon your personality, your strengths and what you can invest while keeping you safe.
Speaker 3:Well, I think that's exactly right, jack, because we all use this analogy. But when you go to buy a home, you get pre-qualified right. You don't want to look at million-dollar homes if maybe the most you can afford is a $500 home. And I use this analogy with my clients a lot too because, like we spoke about, a lot of them are doing this for the very first time. They're out of their element.
Speaker 3:They've got a lot of you know different things coming at them and they don't know how to make sense of all of it. And I tell them I said hey, like your process. Right now you're exactly where you should be. It's like dumping a thousand piece puzzle on the floor and you don't know how that picture is ever going to come together. But every conversation they have with someone like myself or you or a franchise or existing franchise owners, they put a couple more pieces of that puzzle together and eventually that picture starts to become clear and they just naturally move more towards it if it's the right fit for them, or they start to go. You know what? I don't think franchising is for me, but the picture does become clearer as they have the conversations.
Speaker 1:I think that's so perfectly said, Kelly. I think that's the great way to end this for those of you out there who want to talk to Kelly again. Kelly, would you mind sharing that email address one more time?
Speaker 3:I will. It's kelly K-E-L-L-Y at Benetrendscom. I'll give you my phone number too. I just have to read it off the wall because I don't ever remember it. I don't call myself. Direct line is 267-328-1296.
Speaker 1:And for those of you that are listening it's true she's actually looking at the wall right now as she reads it. But yeah, no, kelly, that's great. And, of course, for those of you that would like to start your journey with us 305-00050. You can text that, you can call it, but I know I'm speaking for Jill and for Kelly when I say we'd all love to help you just figure out first, is franchising the right thing for you? And two, if it is, what's your best strategy?
Speaker 3:What's your best strategy, what's the best franchise, what's the best path for funding? And we're all here to help. Well, I appreciate your time so much. Thank you for having me. It was an absolute blast. I think the world of you two and your little guy is probably going to build the biggest empire of everybody, right?
Speaker 2:Because, yeah, I can't wait to see you, we'll connect him with you when he's ready. Okay, I don't think he's going to need me.
Speaker 1:Kelly, thank you so much, great spending time with you Happy holidays, thank you.
Speaker 3:Happy holidays to you too. Take care Bye.