Franchise Financing and Structuring Methods for 2024

Written by: Patrick Findaro
Last Updated by Rocío Torres: February 22, 2023
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This article is based on a video originally recorded on Vetted Biz Youtube Channel

Patrick: Patrick Findaro here, co-founder at Vetted Biz. Very excited to have on Larry Carnell, VP of Development at Benetrends. He’s also named Dr. ROBS as he introduced a pretty unique structure that we’ll go in today for those that are looking to invest, buy a franchise, buy a business in a nice tax-efficient manner. And in today’s conversation, we’re going to go through how you should best plan about starting a business and then potentially selling a business and a few different case studies, lesson learns that Larry is had in his career as a successful entrepreneur, as well as acting as an advisor. Larry, thanks for joining today.

Larry: My pleasure, Patrick. Appreciate the opportunity to join you.


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Business structure

Patrick: I understand you’ve owned multiple businesses, you’ve advised people on buying businesses, financing businesses. What draws you and what keeps you going and helping entrepreneurs?

Larry: I’ve had some moniker of success. If you make enough mistakes, they call you an expert. For better or worse, you’re stuck with me today or your audience is. In the new economy, there are efforts to provide free healthcare, free education, free daycare, free cookies, free ice cream. And a lot of these things are wonderful to have. But be aware of the things that they’re trying to give you today to get their votes. There’s going to be a price tag to pay for it. Entrepreneurs are probably going to be the ones that have to pay for much of this issue because the general public cannot have their taxes increased much more. You can only get so much blood out of a turnip, so to speak.

Primary mistake when starting a business

Larry: I believe in this new economy, there are things that we need to do from a structure standpoint. It’s not just about starting a business. I believe that is the primary mistake that many business owners make. They’re so focused on getting into a business, they don’t think about their exit strategy. The things that you do today, there are things on the table right now that you don’t have to be concerned about. It’s not what is there today when starting a business, it’s what’s going to happen over the course of the next 5, 10, 15, 20 years to rob you of that wealth that you create in a business. How you structure that business today can significantly impact you, your family, and your children.

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Wealth creation

Patrick: Probably traditionally, like the structuring was done for seasoned entrepreneurs that had already made it, they had a nice capital gain, and they already have the assets. Wealth is created from very small companies all the time and it’s better to plan upfront.

Larry: Be aware there are efforts politically to not just go after the growth. There are political efforts right now to double capital gains tax. The argument is, even if you create this wealth and the business is sold, then you’ve got all this wealth. But what you got to be careful of is politicians. In the recent election, there were proposals to tax assets, not your business, even after the business is sold that tax the assets that you have. That is scary, but there are things…

What politicians do

Patrick: So effectively a wealth tax that’s been commonplace in some European countries and effectively we have it on a property. It’s at a very small percentage and you get the benefits from your public schools.

Larry: Here’s the trick. If I can give a word of counsel to any of your audience is doing what politicians do. These politicians, I don’t care whether you’re a Democrat or Republican, in my opinion, they’re all crooked. Do what they do because they know what’s about to happen. I’ve learned this about politicians looking at over 50 years of case law, tax laws that have been created. They always create programs to help buy votes, but they never take away benefits that adversely affect their wealth. In my opinion, and many things that are happening right now, the entire country is being stampeded like a herd of buffalo toward the cliff. We’re not going to be able to save the buffalo. But we can save ourselves, protect our families, protect our children by finding rocks to hide behind.

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The rocks

Larry: Guess the easiest way to find those rocks?

Patrick: How?

Larry: Look where the politicians are hiding their money. They know where the rocks are, and they’ll never take that protection of that rock away from their wealth. This is what I do. Much of what I’ve done is lecture across the country, not on funding, but how to accumulate, accelerate, protect wealth, mitigate taxes for you and your family literally beyond the grave. There are some things happening in America right now that have become the fastest-growing erosional wealth in the history of this country. This was what I was predicting back in the 1990s. I predicted by 2020, 50% of all bankruptcies in America would be due to healthcare-related issues jumping from 20-some-odd percent up to 50%. As of 2020, I missed the numbers by 17%.

The “American Journal of Public Health” just announced that bankruptcy due to healthcare-related issues during the last few years of your life now account for 67% of every bankruptcy in America. This has totally created a paradigm shift in the necessity to not just structure a business, but structure it with an exit and wealth protection strategy in mind. 

That's the reason we specifically design plans not just to provide funding, but to help you to accumulate and protect that wealth that you create for your family.

Best time starting a business

Patrick: As you said, funding, it seems like right now with SBA programs, if someone has a retirement account, there’s a lot of ways you can fund a franchise, a new franchise, an existing franchise, a business that you want to purchase.

Larry: Absolutely. In fact, in my opinion, now is some of the best times in decades for starting a business. You have wealth protection features and tax protection features that you didn’t have decades ago. We can use a combination of programs to help you not only acquire a business but be able to leverage the ability rather than going out and buying a $200,000 business, go out and buy a $400,000 or $500,000 business.

One of the very first deals I ever did was a guy that was looking at a $300,000 business. When he looked at everything, he said, “There’s not enough money in it. I’m just going to go and try to find a job.” I was able to leverage his retirement funds to enable him to buy a $1.3 million business that he didn’t think he would be able to afford. But the profitability in that was much more attractive than going back to the J-O-B.

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Generational wealth

Patrick: I imagine the cash flow it generated paid for his lifestyle and he could save some of that cash flow and he was building what could be generational wealth.

Larry: That and more. More importantly, it was creating an income stream for his spouse if something happened to him, and even his children if he wanted to bring them into the business later on. So generational wealth for him and his family because, I don’t know, I’ve got eight kids, I don’t know if the opportunity for my eight kids are going to be as great as they were for me as I was growing. It’s becoming more of a challenge to be successful in business because of the efforts to take away the profit. When that happens, it decreases motivation. But in every economy, some certain industries and businesses are doing well. That’s the reason I’m a big advocate of working with franchise experts, franchise consultants, business brokers, or other people to help you filter the good from the bad.

Being a banker

Larry: I used to be a business broker, an award-winning franchise expert. I was a trainer for the International Business Brokers Association. And I bring some experience to the table that a lot of people in finance don’t have. Ironically enough, I kind of joke that I’ve always hated bankers, and lo and behold, I became a banker. The difference is I approach everything from an entrepreneurial standpoint. Not what’s best for the funding resource, but what’s best for the employer or the business owner.

Patrick: I would say you’re more of an advisor that a bank might just be offering one or two products where for what you offer through Benetrends, you have a lot of different ways that you can go about structuring it. No?

Larry: Part of it is that many loan officers in banks are incentivized to collect an application, to get your application. And the problem is the loan process now can be several months long because they can get a bonus for getting a lot of applications, even if they know the loan is not going to be approved…

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