SCP invests in Franchises that invest in the community
Social Capital Partners arranges loans for new franchise owners or existing owners looking to refinance. Financing is structured as subordinated debt so that it can be viewed as equity on a company’s balance sheet by more senior lenders. This capital is generally difficult to secure elsewhere, and may make it easier for franchisees to obtain standard bank financing.
The maximum amount of financing available is $300,000 per franchisee, but the actual amount will vary depending on the needs of a particular franchisee and the number of employees they expect to hire through the community hiring program. Loans are generally amortized over a 5-year period with monthly interest plus principal payments.
Socially adjusted interest rate
At Social Capital Partners, we are willing to take a lower economic return for a higher social return. That's why we tie our interest rates to the number of community hires a franchisee makes – the more people hired through community agencies, the lower the interest rate becomes. Interest rates are adjusted on a quarterly basis.
When a franchisee applies for a loan through SCP, the first thing we do is conduct an assessment of the organization's hiring needs. We assess how many community hiring opportunities exist currently and in the future based on growth estimates. From there, we create an interest rate table tailored to the business, with rate reductions tied to achievable community hiring targets.
SCP does not leave our clients to do the hiring themselves. We actively broker the relationship between our clients and community agencies to produce job-ready candidates that are pre-screened to meet a franchisee’s specific hiring requirements. This human resources support is critical in helping clients get the best interest rate possible and to allow us to achieve our employment creation goals.
How does the franchisor benefit?
SCP provides franchisors with an opportunity to expand their network, while ensuring that a franchise is fully supported and appropriately capitalized. Our financing program also provides franchisors with a vehicle to grant franchises to individuals who have all the right business and personal qualities necessary to run a successful franchise, but lack the capital to do so. For instance, franchisors could potentially award a franchise to a successful manager of a company-owned store who would not otherwise have the financial net worth to become an owner on their own.
How does the franchisee benefit?
We facilitate access to subordinate debt capital for franchisees at below market interest rates – the money needed before approaching a bank for financing. Since our interest rate is tied to the number of people hired through community agencies, franchisees have the opportunity to make a significant contribution to their communities while reducing the interest rate on their loan at the same time.