Mike McFall is not afraid. Despite the long shadow this recession has cast over much of the quick-service industry, the president of Biggby Coffee says his Michigan-based gourmet java chain has continued to expand. Granted, growth is not what it was before the U.S. economy took its regrettable nosedive late last year, but with 14 new Biggby locations in development, it clearly hasn’t ground to a halt either.

“The biggest problem we face is not reality. It’s perception. The perceived lack of financing has become a red blinking light in prospective [franchisees’] eyes and it has slowed down development,” says McFall, who oversees more than 100 Biggby locations in eight Midwestern states. “There is a great deal of fear out there, and while the criteria has gotten more stringent, banks are still lending.”

Like McFall, many quick-service owners say they are ready to grow. But where desire abounds, confidence and capital are in short supply. Since the start of this recession, entrepreneurs and quick-service operators have been significantly blocked from the Small Business Administration (sba) loan market, with banks and lenders either unwilling or unable to provide financing. At the end of last year, new lending became nothing but a pipe dream, forcing many franchisors and franchisees into woeful hibernation.

Consider that during the last three months of 2008 the number of SBA loans fell 57 percent from the same time period a year earlier. Moreover, the amount of money loaned fell 40 percent to about $2 billion.

All of this leaves a key question on the minds of operators and wanna-be franchisees: When will it be safe to expand?

Soon, says Cheryl Carner, managing director of retail lending at CapitalSource Inc. An evaporation of fear, she says, seems to finally be taking place in the credit market—albeit very slowly.

“I would say that there is a thaw going on, but I would describe it as a thaw on the outside while it’s still frozen in the middle,” Carner says. “Back in January and February, everyone was still scared of their shadows, so even people with capital were not comfortable deploying it. But we’re starting to see lenders willing to talk about and evaluate deals, which is a good sign.”

The federal government has certainly made an effort to play a part in alleviating those fears. With the signing of the American Recovery and Reinvestment Act into law in February, Congress included more than $630 million in funding to improve and strengthen SBA loan programs. Moreover, President Barack Obama unveiled a plan in March to purchase up to $15 billion of loans from secondary markets backed by the SBA 7(a) and 504 lending programs, with the intention of encouraging new small-business lending.

As an investment adviser with Santos, Postal & Co., Bob Greenfest provides asset management to several quick-service outlets. He says much of the optimism about the economy’s recovery is premature and that investment capital will remain frozen for some time. He is encouraged, however, by the government’s stimulus efforts and urges prospective franchisees to seek out SBA-certified lenders during this recession.

“Right now financing for small businesses is difficult regardless of the industry. Quick-serves are no better or worse off than furniture or clothing stores,” Greenfest says. “But if you can find a bank that is active in the SBA system, and you think you have a viable business, go for it. A government guarantee is never a sure thing, but it certainly provides an additional level of comfort.”

But the availability of financing is only as beneficial as the viability of the business itself, says Cindie Jamison, national director of CFO services for Tatum LLC, and former chief financial officer for Chart House Enterprises Inc., a 60-unit, $150 million NYSE restaurant company. Jamison says prospective quick-service entrepreneurs must be as concerned with the long-term health of the brand in which they are investing as they are with the robustness of the credit markets.

“As a franchisee you need to make darn sure the concept you’re buying into and the company holding that concept is healthy enough to support your location, because sometimes when companies start struggling they look to franchisees as a source of liquidity,” Jamison says.

That broader perspective, McFall says, has been a key factor in the health of

Biggby Coffee. “The first thing [a franchisee] has to do is look for an industry he can enjoy and, more importantly, one that is growing,” McFall says. “If the industry isn’t growing, financing won’t matter, and for us the overall consumption of gourmet coffee is skyrocketing.”

All of this added caution and fear is not without its silver linings, says Mitch Jacobs, CEO of On Deck Capital, whose primary borrowers are entrepreneurs in the quick-service industry. Jacobs says the extreme tightening of lending markets has caused potential franchisees to more carefully consider their investment while also forcing CEOs to more carefully consider the vitality of their expansion plans.

“Everyone is much more cautious about taking on loans,” Jacobs says. “When you see friends and neighbors getting into financial trouble, you have a heightened awareness you didn’t have when everyone was buying a new car or house without caution. So this situation where there is so much added concern may be a good thing.”

So how about ending with a final note of optimism: According to a May Wall Street Journal report, the percentage of small-business loans sold on the secondary market (a key indicator of credit mobility) rose from 24 percent in January to 35 percent in February, and the number of bids received per loan for sale more than doubled in late March and early April.

Carner says that when the full decline and recovery of this recession are finally charted, the shape will resemble the letter ‘U’ and not the letter ‘V.’ In other words, we’re going to be lingering at the bottom for quite some time. “We’d all love to have a crystal ball,” Carner says.