ApplePie Capital (WSJ Article) is a crowdfunding platform which aims to help franchise entrepreneurs by providing them with a more democratized way to raise funds. Historically, anyone wanting to open a franchise had to save money for a substantial period of time and navigate the trickier methods of traditional financing. As most lenders have become more leery about lending money, crowdfunding is a legitimately viable method of getting the funding you need in much less time than traditional saving and borrowing.
ApplePie Capital crowdfunding deals specifically with the funding of franchises. Entrepreneurs wishing to open their first franchise business, buy into additional franchises, or expand their existing franchises finally have an alternate way to gain funding. This new method of finance is making it possible for new entrepreneurs to launch their franchise much more quickly and with less paperwork. This helps to create economic growth and jobs within communities and fuels success.
You can receive loans anywhere from $100k to $1million as a qualified borrower which can be used to start, expand, acquire, or retrofit an existing franchise. In addition to borrowing larger amounts more quickly than with traditional finance methods and without personal collateral requirements, you’ll be forging relationships with lenders who will be advocates for future business dealings.
Rates for borrowing through ApplePie crowdfunding begin as low as 7%, no collateral is required, there are no hidden fees or penalties for paying off your loan before the maturity date. The interest rate and payment rates are fixed which means your repayment expenses are stable and predictable and easily worked into your budget. Investors are attracted to these fixed income returns and to franchise lending because these businesses already have a recognizable brand and customer base. These recognized brands have proven and successful business models which make it easy to predict and measure success.
Franchisors face unique challenges and ApplePie Capital’s approach to franchise financing matces both existing franchisees and those just beginning in the world of franchises to get beyond the barriers normally associated with traditional financing. Uncertainty for lenders is reduced by ensuring all candidates are pre-qualified before they open a campaign and the process from pre-qualification to full funding can be as little as a month. This secure marketplace makes it fast and easy for all parties involved to begin working together and reaping the rewards.
ApplePie (Crunchbase) uses financial experts who are able to create financing programs which are tailored to your needs so entrepreneurs can open their first franchise, add new locations, take over existing locations, retrofit or renovate existing locations, or refinance existing franchise debt .
Investors are able to diversify their investment portfolios in ways which were previously hard to attain. Returns are targeted and range, on average, from 7-12% with interest on monthly payments. Because these are well-known brands, there is little risk involved compared to other types of business lending. Lenders are able to diversify their portfolio across many loan types with many brands, sectors, and more. The entire process is simplified and lenders can contribute to an investment online within a few moments and will receive their monthly repayment directly to their bank account.
Franchises themselves are less risky overall not only due to them being a recognized brand already, but also due to the fact that the brand owners themselves have a vested interest in any franchise opening up under their brand name. Franchises have also proven time and again that they are rather recession proof and less likely to fail during tough economic times than single-unit businesses. This segment of business also has demonstrated the ability to grow at a faster rate than other forms of business and even grows faster than the U.S. economy typically does.
ApplePie Capital has also taken a lot of guesswork out of the entire process for both lenders and borrowers and uses a multi-factor underwriting model which aims specifically at high quality brands, borrowers, and loans. Multiple aspects of the brand and business are evaluated as are how the loan proceeds will be used. Factors taken into consideration prior to forging a deal include the prospective franchise owner’s experience, credit history, and asset coverage. The brand itself is also evaluated and ApplePie examines its cash flows, history, and locations for stability and potential for future success.
Investment minimums are as low as $1,000 and work as fractional shares in the overall business but it is also possible to invest the full amount required by the borrower should the institution be able to comfortably cover it without putting themselves at excessive risk. If the franchise fails to make a required payment on a loan, ApplePie can pursue collection efforts, refer the delinquent loan to a collection agency, and eventually take action. Action can be taken in several ways to recover the loan amount such as pursuing the personal guarantors, selling the business assets, or making use of any existing credit enhancement policies the franchise brand may have. This can include subordination of royalty payments, instituting store resale programs, or guaranteeing a portion of the franchises loan with the franchise brand itself.
Investors must meet ApplePie Capital’s criteria as qualified investors in order to participate in their marketplace. If the investor is an individual and not an institution, they must be a permanent U.S. resident or U.S. citizen, have an individual income of $200,000 or combined income of $300,000 with their spouse for a two year period, or have a net worth of $1,000,000. This information can also be demonstrated by testimonial letter written and approved by a registered broker, financial advisor, lawyer, or registered accountant.