Business financing hit a wall during the recession and has yet to fully recover. Nearly half (49.2 percent) of International Franchise Association members still identify access to credit as their top concern.
Small business and large chains alike are tapping into as many avenues as possible to find the funding they need. One alternative resource, Boefly, streamlines the application process before pitching it to a database of banks throughout the country.
The franchising component, which launched in the beginning of 2011, connects borrowers and lenders by making a compatibility match of the information in a loan request and the lending profiles of more than 1,000 banks.
Boefly's matching technology is proprietary and has caught the interest of many big-name players in the restaurant industry, including Dunkin' Donuts, CiCi's, Baskin-Robbins, Carl's Jr., Hardee's, Arby's, Del Taco, Cinnabon, Rita's Italian Ice, Saladworks and more.
Boefly's compatibility technology is similar to a Match.com or eHarmony-type of dating website.
"That (technology) is the difference. Other industries have gotten more efficient with online opportunities – there are dating sites, cars.com, ebay, where you can shop and compare for something better. This is an extremely convenient way for parties to find what they're looking for. But nobody had ever applied that to a small business loan market," said David Nayor, Boefly's co-president and COO.
System works for borrowers and lenders
Prior to creating Boefly, Nayor and his two partners, Mike Rozman and Bobby Tennenhauser, worked in the lending business, which gave them the idea to cut costs on both sides of the fence.
"It is expensive for banks to originate a loan and most people don't think about that. They have to pay their sales people, underwriters, closing and support staff. It can cost 2 to 4 percent of the loan amount. We wanted to lower the exchange cost for the bank, which ultimately lowers the cost for the borrower because they won't have to pass on those expenses," Nayor said.
The model's big focus is to bridge inefficiencies in the lending process, since franchise loans have been down by as much as 40 percent in the past two years, Rozman said. For borrowers, Boefly walks them through the entire loan package, from start to finish, and connects them to the credit they need, even if it happens to be from a bank across the country.
Franchising accounts for about 50 percent of postings thus far. Of that, about 40 percent is from the restaurant industry for start-ups, expansions and other improvements.
"BoeFly allows our franchisees to get funding efficiently by expanding their reach to targeted, qualified lenders," said Ned Lyerly, EVP global franchise development of CKE Restaurants, parent company of Carl's Jr. and Hardee's. "With the numerous capital requirements facing our franchise community today, we believe BoeFly will help accelerate our remodel, co-branding and new restaurant development initiatives."
Nayor said pizza concepts have especially been attracted to the model, as evidenced by the number of chains that have signed up, including CiCi's, Marco's, Toppers, Boston Gourmet and others.
CiCi's signed up for Boefly in February. The company pays for the subscription and franchisees have an option of whether or not to use the service. Bill Spae, CiCi's chief development officer, said the decision to incorporate Boefly as an option gives the chain's franchisees a better chance in securing financing.
"With so many concepts struggling in the current economy, especially restaurants, we recognized the immediate need to help our franchisees gain an edge for their small business. We felt that Boefly's ability to place our franchisees in front of their network of lenders with just one application was an ideal concept," he said.
A few months in, Spae said the results have been very positive.
"Franchisees who had been somewhat unsuccessful achieving visibility to their loan have now gained interest from five to 10 lenders a few days after their package was posted," he said.
Nayor said each application is viewed by an average of seven banks.
Boefly simplifies an otherwise daunting loan application process, eliminating the piles of paperwork and the need to sell a business model in person to a local bank. Franchisees submit an online form with the specifics, including loan size and debt risk, and are assigned a compatibility score based on their answers. Interested lenders then seek out a full application and notify the applicant of a deal offer.
Programs run from $99 (full use of system and online support) to $499 (including a dedicated representative). Franchisors usually pay the monthly subscription fee, while franchisees are charged a one-time set-up fee of $25.
Nayor said the system has resonated thus far because people just want more financing options, without paying broker fees or commissions, after experiencing a somewhat dry well for the past couple of years.
"The match technology dramatically increases their odds and gives borrowers more power to understand what is going into their loan," Nayor said. "Brands can't grow without financing. This is a game-changer."
Boefly has been nominated for Small Business Trends and Small Biz Technology's Business Influencer Award. The winners will be announced in mid-August.
Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.