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Contact: Alisa Harrison, 202-628-8000
LAWMAKERS NEED TO DO MORE TO FREE UP CREDIT FOR FRANCHISE BUSINESS
IFA Issues Grassroots Alert to Members to Contact Congress
WASHINGTON, April 21, 2009—The International Franchise Association today issued a member grassroots alert to inform lawmakers that franchise businesses can be an important part of the economic recovery if more is done to encourage credit access for small businesses.
“A recent report by the IFA Educational Foundation determined that for every $1 million of lending obtained by franchised businesses, 34 jobs are created and $3.6 million in annual total economic output is realized,” said Matthew Shay, IFA president & CEO. “While national news coverage and lawmakers have focused mostly on the billions being spent on government programs to help stimulate the economy, it has largely overlooked the most important sectors to help stimulate the economy—small businesses and franchise businesses.”
Over the past decade, small businesses have accounted for 60-80 percent of annual job creation, and currently account for almost 50 percent of total jobs in the private sector. “The federal government has missed the mark so far with efforts to fix small business lending,” Shay said. “The recent economic stimulus legislation spends nearly $800 billion, but less than one-tenth of one percent of the total is dedicated toward assisting small businesses. We think there is a better way, and we are urging our members to tell Congress to devote more resources and tools to the small business sector.”
Shay noted that Congress and the Administration have taken some steps to improve the availability of credit. But despite these efforts, franchised businesses and prospective franchise investors with strong credit histories continue to see loan applications denied unnecessarily. Further proof is the decrease in Small Business Administration lending. Normally, the SBA guarantees approximately $20 billion in loans annually. New lending in 2009 is predicted to be less than $10 billion.
Recognizing the challenges faced by franchised small business entrepreneurs, the IFA has developed an online advocacy center for information and grassroots tools to help them communicate with their members of Congress.
Franchise business owners and aspiring owners are asking Congress to focus on efforts to increase small business lending and less on federal spending.
“Current projections show that the federal government will spend as much as $4 trillion to rescue the economy,” Shay added. “But, instead of simply adding more spending, our members feel that substantial efforts to promote small business lending will lead to sustainable small business job creation.” The IFA and its members are specifically asking Congress to:
• Increase the maximum loan limit for the standard 7(a) loan from $2 million to $3 million so that more businesses can take advantage of the program,
• Temporarily eliminate or sharply reduce SBA lender fees to increase the incentive for banks to make loans,
• Allow market-based loan pricing so that SBA loan caps are not discouraging banks from making loans,
• Reverse SBA’s new policy on acquisition financing for “goodwill” that is unnecessarily dragging down the value of established small businesses, and
• Promote sensible audit standards so that lenders will not fear losing their SBA guaranty after the loan is issued.
About The International Franchise Association
The International Franchise Association, the world’s oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of more than 1,250 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA Web site at www.franchise.org.