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Child Care Franchisee Saves $85M in Cash Flow with $550,000 Loan

“They were the first company to meet with us face-to-face and took the time to understand “the American Small Business Owner.” The banks were completely unresponsive or turned us down without a reason. Joe Dreyer of 44 Business Capital took the time to come out to our day care center and learn about our daily operation and proceeded to guide us through the loan process.”

Mike & Michele McKenna, Owners
The Learning Experience

CHALLENGE

Mike and Michele McKenna are one of the first franchisees of The Learning Experience child development centers. Today, they are one of over 100 franchisees across the country and recently won the Chairman's Award of Excellence for 2011 by The Learning Experience Corporation.

However, in the beginning the road was a bit rocky. In 2004 the franchisor engaged a developer to construct the building the McKenna's now occupy as tenants. The building was completed and a C/O issued in June 2004, which meant the McKenna's were responsible to start paying rent. Because the Dept. of Public Welfare delayed the day care center license, the client ended up carrying the school for almost 6 months prior to the official opening. This caused a tremendous hardship for the McKenna's who were not deterred. They poured all their resources into the company, obtaining a $270M SBA loan and injected over $100M of their own money. Over time, they used business bank lines and business credit cards to help fund the center until enrollment was built up and the center started to generate cash.

As soon as the day care center was full, the McKenna's wanted to consolidate their debt and pay off the minority shareholders, who do not have a daily interest in the business. Overall, 44 Business Capital saved them $85M in cash flow by consolidating all the existing debt and facilitating the buyout of the passive minority owners. While the loan lacked collateral, the operating history, personal credit, great location, cash flow and management experience all mitigated the shortfall of collateral.