Paragon's Prez Shares His Favorite Types of Borrowers
“We do want to diversify. We don’t want everything in fast food,” says Charles Yorke about the franchisees Paragon Small Business Capital Group likes to finance. We tracked down Yorke, president of the Paragon Bank division in Atlanta, right before heading to the Franchise Times Finance & Growth Conference in mid-March, to learn about one lender’s outlook.
“We try to diversify among industries. Then we try to find the big players in each sector,” Yorke added. Who does Paragon like? “For example, in fast-casual you’ve got Newk’s. They’re an up-and-comer, someone we’d like to try and look at.”
They’ve lent to Primrose franchisees in the childcare space, Sky Zone ‘zees in the trampoline park space, and Orangetheory ‘zees in the fitness space—and were pleased when Roark Capital invested in Orangetheory earlier this year. “We like it when they come in because that means they’ll bring the financial components” and operating expertise to the brand.
Paragon just received Preferred Lenders Program status, allowing it to approve loans guaranteed by the U.S. Small Business Administration. The designation is important “because it puts you in the upper echelon of lenders. It says that you have the backroom office to support a pretty sizable function,” Yorke said.
He added Paragon likes to lend to franchise concepts with 50 or more units already on the ground, and to franchisees that are newer to the party. “We’re lending to that first-time operator, and the one- to five-unit operator is where we play,” he says, which should be good news to many would-be borrowers. “It’s more difficult to play in that five-plus operator area because they have more access to conventional financing and private equity.”