For immediate release
Contact: Alisa Harrison, 202-628-8000
aharrison@franchise.org
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Franchise Business Leaders Meet with Key Policymakers at Treasury and Federal Reserve
WASHINGTON, July 23, 2009—The International Franchise Association urged Treasury Department and Federal Reserve officials to help break the logjam of credit access for the small business and franchise communities during meetings with key officials late yesterday.
“We had constructive meetings with senior officials at the Treasury Department and the Federal Reserve,” IFA President & CEO Matthew Shay said. “We feel that key policymakers are as solution-focused as we are and understand the important role that small and franchise businesses play in the economic recovery.”
During the meetings, Shay, IFA 1st Vice Chairman Ken Walker, CEO of Driven Brands, IFA Secretary Jon Luther, executive chairman of Dunkin’ Brands, and IFA Vice President of Government Affairs David French reiterated that last week’s CIT crisis is a symptom of a broader problem. As one of the largest lenders in the Small Business Administration loan program, the CIT’s existence is important to the franchise community, which relies on the important program to help finance new franchises. The earlier market withdrawal of other lenders in the SBA programs leaves franchise businesses with few remaining lender options.
“We are concerned that signs of recent increases in SBA loan activity are creating a false sense of recovery of this key marketplace,” Shay said. “The activity has been predominantly real estate refinancings. While important to help some small businesses stay afloat, these ‘re-fis’ do not equate with job creation.”
Franchise businesses account for 21 million jobs in the U.S., but the lack of capital and reduce loan activity threatens these and future jobs in the franchise sector.
“The recession has cost real jobs,” Shay said. “At least 200,000 jobs have been lost in franchised businesses and more than 15,000 retail units have been lost. Our brands have a strong pipline of motivated franchisees waiting to start new businesses, and we can create jobs if capital is available.”
Shay said a program to support financing for loan syndication would spur small business lending.
“We encouraged the government to create a more viable secondary market for small business loans along the lines of what was discussed by officials in March to use stimulus money to clear secondary markets,” Shay said. “We are encouraged that policy makers are actively considering this and other programs to address the credit access issue.”
To help further improve the SBA program, IFA recommended substantial changes, such as:
• Increase SBA 7(a) loan size to $4 or $5 million to facilitate financing for medium size borrowers.
• Expedite SBA loan application process and make it less cumbersome to make capital more readily available.
• Eliminate (temporarily) 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 do not discourage banks from making loans.
• Promote sensible audit standards so that lenders will not fear losing their SBA guarantee after the loan is issued.
“We look forward to continued dialogue with Treasury, the Federal Reserve and other policymakers on solutions to help small and franchised businesses do what they do best—create jobs,” Shay said.
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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 nearly 1,300 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.