Let It Flow: Industry desperately needs access to more credit

**For every $1 million of lending obtained by franchise small businesses, 34 jobs are created and $3.6 million in annual economic output is realized.

The current recession and credit crunch are putting the hurt on franchise businesses, says a new report by the International Franchise Association (IFA). There's no question that the franchising's economic growth and ability to create jobs has been hamstrung by the lack of available credit.

The study, Small Business Lending Matrix and Analysis, prepared by industry research firm FRANdata, highlights the relationship between lending to the franchising sector and its capacity to develop new businesses and expand existing ones. According to the findings, franchise lending will fall 40 percent in 2009. Fallout will include the loss of nearly 50,000 jobs and more than $5 billion in lost economic activity.

Need more proof? The U.S. Small Business Administration reports that small businesses have accounted for 60 to 80 percent of annual job creation over the past decade, and currently account for almost 50 percent of all jobs in the private sector.

"Historically, franchising as a business model has been extremely resilient to economic slowdowns, which has helped spur the pace of economic recovery and provide alternatives to individuals who were downsized or displaced by other businesses or sectors of the economy," says Matthew Shay, IFA president and CEO.

According to the report, every $1 million lent to franchised small businesses creates 34 jobs and $3.6 million in annual economic output. But the credit crunch is constraining this potential growth and slowing overall economic recovery.

Shay says the U.S. government must do more to help open channels of funding for the franchise sector.

"We can break the logjam of capital for new small business creation and expansion of existing companies by making modest changes to SBA lending policies," he said. "But every day that we delay fixing this credit crisis will cause more small-business owners to wither on the vine due to constricting credit policies."

Published: May 29th, 2009

Share this Feature


comments powered by Disqus
Golden Corral

Multi-Unit Franchising Topics »

Top Opportunities »

Subscribe »

Multi-Unit Franchisee Magazine

The only publication dedicated exclusively to the hottest topic in franchising - Multi-Unit and Multi-Brand Franchisees.

Attend »

Multi-Unit Franchising Conference

Multi-Unit Franchising Conference

APR. 23-26, 2017 | Caesars Palace, Las Vegas, NV

A unique event because it is highly influenced by its advisory board, consisting of the very best multi-unit franchisees. The board works diligently to ensure that the conference delivers on its promise of being the best platform for franchisees to learn how to grow their businesses.

Subscribe to Multi-Unit Franchisee Report

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)