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Calls For Greater Franchise Lending Gets Louder

In the week before Thanksgiving, Steve Bartlett, president and CEO of the Financial Services Roundtable and Richard Hunt, president of the Consumer Bankers Association published an editorial that turned a lot of heads in the franchising community.


Barlett and Hill wrote in The Hill that the commonly-held opinion that small business lending has frozen up entirely in the US is in fact a myth. "The fact is financial institutions are lending, and have pledged to lend enormous sums to small businesses for years to come," they claim.


They then quote the following developments:

  • BMO Financial Corp. has pledged to increase its lending pool by $5 billion through 2013 to small- and medium-sized businesses
  • PNC originated or renewed $1 billion in small business loans in the third quarter of 2011 alone
  • JP Morgan Chase is boosting its lending by $2 billion, or 20 percent this year.
  • Wells Fargo became the first financial institution to provide more than $1 billion in SBA loans in 2011


It is certainly hard to refute the fact that banks are engaged in small business lending. But yet on the other hand, we continue to hear about a struggle to obtain financing from the franchise community. Interestingly, IFA president Steven Caldeira penned a column in The Hill this week replaying to Barlett and Hill. His point isn't that small-business financing has stopped entirely, but that level of financing does not  match the demand for financing on the entrepreneurial side of things.


"According to an IFA analysis by FranDATA, lending to franchise businesses in 2011 will fall short of the forecasted demand for growth by 20 percent – a shortfall causing 82,000 new jobs not to be created as well as keeping 8,000-10,000 new franchise establishments from opening their doors this year," he writes.


Caldeira also writes about the initiatives he and others are taking on Capitol Hill to increase franchise lending. It is unfortunate that so many qualified prospective franchisees are being turned away. Hopefully these lenders will continue to put their money where their mouths are and find more franchising. The domestic economy could use the boost.

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