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Banking & Finance

Live Oak Bank Launches Franchise Restaurant Lending Vertical

By Jenny Callison, posted May 23, 2018
Live Oak Bank is geared up and ready to begin lending in its newest industry: franchise restaurants. In an announcement Tuesday, the bank said that this new lending team, led by general manager Lew Woodbury, will consider loans to franchise operations from quick service and fast-casual to full-service dining, from small-scale franchisees to owners of large networks.

“For our profile of borrower, which is anything from a first-time operator to a multi-unit operator in an intermediate phase but not in a conventional lending relationship [with a bank], it’s difficult to find an SBA lender with a nationwide footprint that can understand and following that brand nationwide and offer a level of industry understanding and SBA understanding,” Jason Lumpkin,  Live Oak’s general manager of emerging markets, said Wednesday.

Lumpkin added that Live Oak’s ability to provide SBA loans anywhere in the country on a streamlined technology platform, combined with the franchise restaurant industry knowledge the bank has assembled in its new team, will benefit borrowers. It will lend for a franchisee’s purchase of an existing location, expansion to new locations and renovations of currently owned facilities.

The team’s industry expert is Jeff Brock, a 25-year veteran of the banking and investment industry. He is managing partner at Hargett Hunter Capital Management.

“My background is in both debt and equity in restaurants,” Brock said Wednesday. “For most of the last 18 years, I spent most of my career financing franchise and non-franchise chains.”

In 2007, Brock joined GE Capital Finance, which he said is the largest lender to restaurants. He held a variety of roles, one of which was maintaining the corporate relationships with large chains such as Wendy’s, Dunkin’ Donuts, Bojangles and Papa John’s. Then, seven years ago, Brock switched to the equity side, making investments in restaurant chains large and small.

“I’m not a restaurateur, but I understand and have experience from a different level than just being a loan originator,” Brock said, adding that he is really interested in Live Oak’s approach to each industry it serves, which involves bringing in a domain expert to guide each industry-specific lending team.

“It was important to them that I had the lending background and, therefore, access to lots of systems and understanding of the history and evolution of these [franchise restaurant] brands,” he said. “Then, layer in the fact that for the last seven years I have been looking at P&L [profit and loss] statements, operations, and what risks exist inside the company – so, not just a financial understanding.”

Live Oak will probably concentrate first on providing SBA loans to franchise operators, but could expand to other federal lending programs later. Lumpkin said that, while Live Oak will “cast a wide net” as it looks at potential deals, it will likely give higher priority early-on to deals involving multiple units and with brands that are well known and have good track records of success and management.

“We probably researched [franchise restaurant lending] extensively for six to eight months before launching,” Lumpkin said. “We have a few applications in the pipeline. We’ve built relationships with folks we think can send deals our way; we’ve gotten a few looks from those folks.”

The franchise restaurant industry is Live Oak Bank’s 18th so-called vertical.
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