IFA: Lending to franchises reaches highest level since recession

April 9, 2013

Lending to America's franchise businesses will reach its highest level since the recession, providing $23.9 billion in lending to support 59,300 unit transactions, but it will still fall short of demand, according to the International Franchise Association.

The Small Business Lending Matrix & Analysis, Vol. 5, prepared for the IFA Educational Foundation by FRANdata, shows that in 2013, new and existing franchise units will create or maintain 797,700 jobs and generate $106 billion of annual economic output to the American economy.

"Franchise growth is inextricably linked to the availability of small business lending and we are pleased to see a positive trend in the availability of capital to existing and prospective franchisees," said IFA President & CEO Steve Caldeira. "Franchising remains the most viable business model in the world to quickly grow and scale a business."

The factors shaping the lending environment for franchise business in 2013 include higher demand for franchise transactions, greater franchisor capacity for growth, increased lending ability by banks to franchisees, increased willingness for both SBA and conventional lenders to finance franchisees and a moderate pace of economic recovery through 2013, according to the IFA.

According to the new study, franchise demand for funding to spur growth has surged in 2013, up 10.6 percent over 2012, so despite the increase in lending, there is still a 9.7 percent shortfall, or $2.6 billion, between franchise demand for growth and banks' ability to meet the demand. The shortfall between demand for financing and availability was 9.1 percent in 2012 and 9.7 percent in 2011. The $2.6 billion (9.7 percent) shortfall will result in 6,400 units not being created, with the loss of 85,900 jobs that will not be created (or in some cases maintained), and $11.4 billion in economic output to the U.S. economy.

Read more about trends and statistics.

Topics: Franchising & Growth , Trends / Statistics

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