Forums: Discussions for entrepreneurs and small business.

I am looking into purchasing a franchise -- my first business.  The franchisor would like me to give them confirmation that I could obtain financing for the purchase, but (understandably) does not want to share their business plan with me until I can prove this.  But from what I have read everywhere, lenders will want to see the business plan before they will determine whether or not to loan me money for the business.  Has anyone else been through this?  What did you do? 

This really shouldn’t be a problem. You may want to leverage your position as a buyer by letting the seller know that without making his business plan and historical financial statements available for inspection he hardly has anything to sell at all.

Although it’s common to make such information available only to qualified buyers (those that can prove to have the financial background to close the transaction) how are you supposed to conduct your due diligence without having access to these documents?

Given the current economic state, I would propose signing a mutual NDA, perhaps even a letter of intent, to create the basis for a good faith gesture. If that doesn’t do the trick, threaten to walk a way from the deal. I can’t imagine that he has too many buyers lined up that can meet this burden. I think he will come around.

Since this is your first acquisition, I’d recommend that you retain the services of an M&A professional to assist you with the process. Since you’re new to this type of transaction, working with a professional may deter the seller to take advantage of you and thus further leverage your negotiating power.

If you’re interested in striking up a conversation, please feel free to send me a PM.

I hope this helps.

Mark