What are the potential liabilities upon default of a Boulder Designs financing agreement?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
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| Item Financed (Source) | Amount Financed | Down Payment | Max. Term (years) | Annual % Rate of Interest | Monthly Payment | Pre payme nt Penalty | Security Required | Liability upon Default | Loss of Legal Right on Default |
|---|---|---|---|---|---|---|---|---|---|
| Equipment and Supplies Package | Up to 50% of the cost of the package if it is new equipment, including any upgrades; up to 75% of the cost of the package if it is used or refurbished equipment | Depends on credit rating | 42 months | 8.5% | Principal and interest amortized over 42 months | None | Personal Guaranty; Security Agreeme nt | Call loan; Repossess equipment; Terminate franchise agreement | Waive demand, presentment for payment protest, notice of intent to accelerate, notice of acceleration |
In our sole discretion, if you meet our credit standards, we may finance up to 50% (if new) or 75% (if used or refurbished) of the equipment and supplies package for a maximum period of 42 months at an interest rate of 8.5% per year. If we agree to provide financing, you must sign the Promissory Note and Security Agreement ("Promissory Note") attached as Exhibit 9 to the Franchise Agreement. The Promissory Note is payable in up to 42 monthly installments. The first monthly installments will be equal payments of principal and accrued interest and the 42nd and final installment will be for all outstanding principal and unpaid accrued interest. (Promissory Note (attached as Exhibit 9 to the Franchise Agreement), first paragraph.) The Promissory Note can be prepaid without penalty at any time during its term. (Promissory Note, sixth paragraph.) If you do not pay on time, we can call the loan and demand immediate payment of the full outstanding balance and obtain court costs and attorneys' fees if a collection action is necessary. (Promissory Note, third and fourth paragraphs.) It is not our intent to sell, assign, or discount to a third party all or part of the financing arrangement.
We may terminate your franchise if you do not make your payments on time.
Source: Item 10 — FINANCING (FDD pages 23–24)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, if a franchisee defaults on their financing agreement for equipment and supplies, several liabilities may arise. Boulder Designs can call the loan, demanding immediate payment of the full outstanding balance, and pursue court costs and attorneys' fees if a collection action is necessary. The franchisee also waives their rights to notice of a collection action and any defenses against collection. Boulder Designs may also terminate the franchise agreement if payments are not made on time. These notes may be discounted to a third party who may be immune under the law to any defenses to payment the franchisee may have against Boulder Designs.
To secure the financing, Boulder Designs requires a personal guaranty and a security agreement. This means Boulder Designs can repossess the equipment. The franchisee also waives demand, presentment for payment protest, notice of intent to accelerate, and notice of acceleration.
These terms are fairly standard in franchise financing agreements. The personal guarantee means the franchisee's personal assets are at risk if the business fails to meet its financial obligations. The ability to terminate the franchise agreement adds another layer of risk, as the franchisee could lose their business entirely due to payment default. Prospective franchisees should carefully consider these risks and ensure they have a solid financial plan before entering into a financing agreement with Boulder Designs.