SBA Lending to Franchises Jumps 60% According to New Industry Report

June 26th, 2013

SBA Lending to Franchises Jumps 60% According to New Industry Report

In a recent press release sent out by the International Franchise Association (IFA), a co-authored article by the Coleman Report and NADCO, found that nearly 3,300 SBA loans went into franchises in 2012, totaling over $3.8 billion. Lending to franchises increased over 60% in 2012, shrinking the credit access gap which has been prevalent since the credit crisis.

SBA Lending to Franchises Jumps 60% According to New Industry Report

A new report released at the start of the International Franchise Expo in New York City shows that U.S. Small Business Administration (SBA) lending to franchising increased more than 60% over the previous year, shrinking a credit access gap that has been the focus of industry efforts since the financial crisis.

The report, co-authored by the Coleman Report, the National Association of Development Companies (NADCO) and the International Franchise Association (IFA), showed that nearly 3,300 SBA loans went to franchises in 2012 for a total of over $3.8 billion, an increase of 34% in number of loans delivered and a 60% jump in dollar volume.

SBA financing for commercial real estate, equipment and leasehold improvements known as “504 loans” increased even more — 67% in 2012 to $2.5 billion in total project finance. 504 loan volume nearly doubled between 2010 and 2012, while 7(a) volume ticked up nearly 12%.

“The dramatic increase within the SBA 504 commercial real estate and equipment loan and 7(a) programs demonstrates the continued ability of the franchising industry to create jobs and generate economic growth,” said IFA President & CEO Steve Caldeira. “While there are clearly still some gaps in accessing capital, especially for the first-time entrepreneur, IFA’s ongoing efforts to better educate the lending community about franchising, has led to significant progress for our industry since the recession.”

“Larger loan sizes supported by NADCO, IFA and SBA as part of the Jobs Act of 2010, combined with our joint franchise lending campaign, have enabled us to nearly double 504 loan volume to franchising since 2010,” said NADCO President & CEO Beth Solomon, representing the nation’s 270 SBA Certified Development Companies (CDCs), which facilitate small business loans. “We are very pleased to see the franchise industry getting financing to create the jobs America needs.”Each $65,000 in 504 loan volume creates one job.

Franchising was a major user of 504 loans, securing nearly 15% of the total $2.5 billion 504 project finance volume and 9.5% of the number of 504 loans delivered. The franchise industry captured just over 9% of 7(a) loan volume, or about 5.3% of all 7(a) loans.

The brands receiving the most SBA loans 2010-2012 were Subway (573), Dairy Queen (182), Jimmy John’s (176), Dunkin’ Donuts (166), Anytime Fitness (154), Choice Hotels (136), Sport Clips (130), Ace Hardware (125), Days Inn (119), Little Caesar’s Pizza (112), Culver’s Frozen Custard (108) and Holiday Inn Express (107).

The Franchise Finance Top 50 brands in terms of SBA loans secured since 2010 are HERE.

“SBA loans have become increasingly popular as a franchise finance solution,” said Coleman Report CEO Bob Coleman. “The smartest franchise concepts are the most aggressive in employing this powerful franchise expansion tool.”

NADCO is hosting the first-ever “Bank Financing Pavilion” at the International Franchise Expo June 20-22, an event expected to draw 15,000 visitors. At the Pavilion, New York Business Development Corporation, New Jersey Business Finance Corp., Bank of America, Citibank and TD Bank will offer SBA financing options to potential and existing franchisees as well as brand development leaders to further increase SBA lending to franchising.

The 504 loan is a 10% down, 10- or 20-year fixed rate loan up to $5.5 million. The 7(a) working capital loan up to $5 million may be variable or fixed-rate, short- or long-term.

To review the full report of SBA loans to franchising in 2012, click HERE.

For more information about the International Franchise Expo, click HERE.

About the International Franchise Association The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.

ABOUT NADCO The National Association of Development Companies (NADCO) is the trade association of Certified Development Companies (CDCs) – nonprofit companies that have been certified by the Small Business Administration (SBA) to provide financing for small businesses under the SBA 504 Program. NADCO represents nearly 270 CDCs, serving all 50 states. In 2012, the industry provided $6 billion to nearly 10,000 U.S. small businesses.

ABOUT BOB COLEMAN Coleman is the leading provider of information to small business bankers to help them make less risky small business loans. His weekly industry trade newsletter, The Coleman Report, began in 1993 and provides critical analytical information for today’s small business lending professional. For more: http://www.colemanreport.com.