IFA URGES GOVERNMENT TO IMPROVE MARKETPLACE FOR SMALL BUSINESS LOANS

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For immediate release

Contact: Alisa Harrison, 202-628-8000


WASHINGTON, D.C., Dec. 23, 2008—The International Franchise Association today urged Treasury Secretary Paulson to consider the critical role franchised-small businesses can play in driving economic recovery and to take action under the Troubled Assets Relief Program (TARP) to improve the marketplace for small-business loans.



“There are more than 900,000 franchised establishments in the U.S. that are responsible for creating 21 million American jobs and generating $2.3 trillion in economic output,” said IFA President & CEO Matthew Shay. “A healthy franchise industry will significantly assist economic recovery in this country and taking action under TARP to make capital available and affordable is a critical step toward that goal.”



The IFA developed a five-point plan that calls for increasing the amount of credit available to franchised-small businesses by strengthening secondary markets, increasing access to capital by changes in Small Business Administration loan programs, reducing tax burdens and uncertainties in the tax code that restrain business investment, making small-business health insurance more affordable and increasing support for veterans as small-business owners.



In a letter to Secretary Paulson, Shay stated that franchised-small businesses rely on programs such as the Small Business Administration’s (SBA) 7(a) and 504 loan guarantees to ensure that affordable financing is available, as many franchisees purchase their businesses using a combination of personal savings, investments, and borrowing. Further delay in addressing the financing needs of small businesses in the U.S. will lead to slower recovery and continued job loss. 



Shay added that the secondary market for healthy SBA guaranteed loans remains dysfunctional. 



“Investors who normally flock to the security of federally-guaranteed loans are currently seeking investments with higher interest rates,” Shay added. “This forces lenders to keep SBA loans on their balance sheets instead of offering them in the secondary market. Without a market, lenders are losing a critical source of additional funding to authorize new loans.”



The increased costs of available SBA loans make them unaffordable to small businesses. “In order to free up the market for new SBA loans, we urge you to deploy TARP funds to purchase a significant portion of existing healthy SBA loans pooled from the secondary market,” Shay said in the letter. 



The IFA supported enactment of the TARP program. Even though many financial institutions received necessary support, these efforts are not making their way to franchised-small businesses. 



“Franchising offers a strong foundation from which to encourage job growth and recovery,” Shay said. “By providing franchised businesses the capital necessary through a fully-functioning secondary market, these entrepreneurs will help lead us out of recession.”


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Editor’s Note: To view the IFA Economic Recovery Plan, click here.


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.


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