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Grant funding for a franchise - Q & A

Shawn calls the show to ask about finding grant money for a franchise operation.

Rich Sloan:     And we are going to Shawn, out of Augusta, Georgia next.  Shawn, welcome to StartupNation Radio.

Shawn:  Hi.  How are you guys doing?

Rich Sloan:   Good.  How can we help you?

Shawn:  Well, I have a question in reference to grant money.  I've done research on the subject and I'm finding you can get grants for a numerous amount of things. But my question is I have my eye on a franchise.  Is there any outlets for grant money for franchises?  'Cause I'm finding that you can get grant money for desert tortoise monitoring, but not to start a business.

Jeff Sloan:    Well, here, let me ask this.  When you say for franchising, you want to acquire a franchise opportunity; is that what you're saying?

Shawn:  Yeah.  I found a great one where essentially you would be a business loan.  Financial operation is what you would be doing.  And I think it would be an excellent opportunity, but I can't find any outlets.

Jeff Sloan:    Yeah.  First, you're talking about getting grant money.

Shawn:  Uh-huh.

Jeff Sloan:    Now, grant money is money that someone or an institution provides to you not in exchange for equity and not in a way that's required to be paid back obviously.  They're just essentially contributing or donating the money to the effort.  I don't know of any institution or person that provides grant money to acquire a franchise.

Now, having said that, there might be one spin on that.  If the franchise has some philanthropic, you know, purpose to it -- again, not knowing what the franchise is

-- you might be able to go out there and make a case to get grant money to get the franchise as part of your business plan, if you will, to deliver the philanthropic or charitable contribution that you're making.

Rich Sloan:   Right.  And Jeff, I'm also hearing her say "loan," and Shawn if --

Jeff Sloan:    And that's different from a grant, correct?

Rich Sloan:   - she does want to go after a loan, is it CIT?  Is that the name of the company that does all of the lending for franchises?  I believe that is the name of it.  And so, you should do a little research on CIT, to see if they might be a source for a loan --

Jeff Sloan:    Right.

Rich Sloan:   -- for starting up that franchise.

Jeff Sloan:    Right.  And of course, there's SBA-backed government loans, too, that you can check out through your banking institutions. But loans are different from grants.  I want to make sure that, you know, she understands the difference between the two.  It's really important.

Shawn:  Yeah, I do.

Jeff Sloan:    Okay.

Shawn:  But therein that leads me to another question.  What happens if you're not, we'll say quote unquote, financially situated or stable to be able to secure a loan?

Rich Sloan:   That's a difficult situation.  That's what an SBA loan guarantee is for, for banks.  So you may want to really stress your research on the SBA-backed loan situation.

Jeff Sloan:    Right.  And I think one of the keys there is if you are, for example, not financially stable as she put it.  I don't exactly know what that means, but maybe it's bad credit, maybe it's that, you know, she's never run a business, or maybe that she has run a business and not done it successfully.

Whatever it may be, one way to offset that is to develop a really good, sound business plan.  And maybe bring in, say, for example, a board of advisors that bring credibility to the project or others;  maybe a partner into the project that does have that financial stability; or maybe even a friends and family guarantee of some kind, whatever it may be.  But you need to build in that credibility or you're not going to get a grant or a loan.  So package yourself really, really well and go for it.