Funding is the fuel that powers the franchise engine. Yet, for many new business owners, securing capital feels like a black box. In this episode, host Sean McKay sits down with Shay Kleinschmidt, the Vice President of Lending at FranFund. Shay shares her journey from a legal background to becoming a leading voice in franchise finance.
They discuss the realities of SBA lending, why your local bank might be the wrong place to go, and the critical importance of vetting a brand before you sign. Whether you are a first-time franchisee or a franchisor looking to understand the lender's perspective, Shay offers practical, no-nonsense advice.
ㅤ
What You’ll Learn- The "Craigslist" Origin Story: How Shay pivoted from the legal field to franchise lending through an unexpected job posting.
- The 4 Buckets of SBA Approval: It is not just about a credit score. Learn about equity injection (10-30%), post-close liquidity, collateral, and the hidden "fifth bucket" - character.
- Why Local Banks Often Fail Franchisees: Shay explains why walking into your local branch can lead to wasted time and why specialized lenders are crucial for startup franchises.
- The Dangers of Rapid Growth: A warning for emerging brands. Selling units too fast without strong unit economics can damage your reputation with lenders.
- Due Diligence is Non-Negotiable: Why you must read the FDD and, more importantly, call existing franchisees to ask the tough questions about cash flow and support.
ㅤ
Episode HighlightsFrom Craigslist to VPShay’s entry into the industry wasn't traditional. In 2012, after layoffs in the legal recruiting sector, she found a Craigslist listing for FranFund. She landed the job, bought "SBA Lending for Dummies," and learned the ropes from the ground up. Today, she manages the entire lending department and executive initiatives.
The Mechanics of the SBA LoanThere is a misconception that SBA loans are risk-free for banks. Shay clarifies that the SBA only offers a guarantee (essentially an insurance policy). The bank still assumes risk and must comply with strict rules. If a borrower defaults, the bank incurs a loss. This is why they require collateral and "skin in the game" from the borrower.
The "Character" VariableWhile financials are black and white, lending is still a human business. Shay emphasizes that banks do not have to lend to you. How you present yourself, your organization, and your responsiveness matter. A borrower with messy paperwork or a difficult attitude can derail a deal, even with strong financials.
Lender Diversity MattersShay recounts a story in which a prominent lender abruptly exited the franchise space, leaving many deals in limbo. This highlights the importance of not putting all your eggs in one basket. Both franchisees and franchisors need a diversified network of financial partners to avoid disruption.
ㅤ
About the GuestShay Kleinschmidt currently serves as the Vice President of Lending at FranFund, a role she has held after rising through the company ranks over a tenure exceeding 12 years. She joined FranFund in 2012, marking a pivotal shift in her career. Originally hailing from Aledo, Texas, where she grew up on a cattle ranch, Kleinschmidt credits her upbringing for instilling a strong work ethic. Her early professional experience included working as an administrative assistant for her father, a federal criminal law attorney.
Her entry into the franchise finance world is a testament to her adaptability. She holds a bachelor's degree from Southwestern University and has since become a recognized leader in the Small Business Administration (SBA) lending space.
ㅤ
About FranFundFranFund, headquartered in Fort Worth, Texas, creates customized funding strategies for franchisees and small business owners. While not a direct lender, they operate as a high-volume "concierge" that manages the entire funding lifecycle. Their core services include the FranPlan® (a ROBS solution allowing the use of retirement funds tax-free/penalty-free for business investment) and SBA loan packaging. They maintain a vast network of lender relationships, enabling them to match borrowers with banks that are interested in specific franchise concepts.
ㅤ
Resources & Links- Connect with Shay: LinkedIn
- FranFund Website: FranFund.com
- Connect with Sean McKay: LinkedIn