The IFA has issued a strident warning to the government as it predicts a sharp decline in franchise lending this year.
A new study conducted by FRANdata for the IFA shows that franchise lending will be down 40% this year and Matthew Shay, IFA president has urged Congress to act quickly to preserve “50,000 jobs and more than $5 billion in economic activity”. Ourselves, and others, have said time and again that franchising is the real economic stimulus plan. But against the backdrop of the economic downturn, this FranData study provides stark evidence of the severity of the economic challenge facing the franchise industry.
The credit crunch that has proceeded the recession has left both franchisors and franchisees unable to access the necessary capital to keep their businesses going. While there have been signs of a slight return to normal, it is clear now that more action must be taken by the government to accelerate lending.
The IFA has called for President Obama and Congress to do the following four things to increase lending to franchises:
- Increase the Small Business Administration’s 7(a) loan’s maximum limit to $3 million from $2 million and the maximum loan guarantee from $1.5 million to $2.7 million.
- Make SBA loan prices to be competitive with other forms of capital investment.
- Halt the new SBA policy on “goodwill” financing of business acquisitions.
- Promote audit standards so banks are assured SBA loan guarantees will be honored.
Mr Shay also uttered this warning to the SBA chief and government about the urgency of the situation: “Every day that we delay fixing this credit crisis will cause more small business owners to wither on the vine.”
We all know these are difficult times, but there things you can do, such as writing your congressman or senator urging them to take action to make lending easier.
You can also check out Franchise Direct’s summer Recession Buster franchise offers, which make it easier than ever to purchase, despite the challenges the economy is facing.