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Although franchise lending has been fairly static from March 2011 to March 2012 and franchisee credit access remains below its long-run average, lending to franchisees in industries such as food service and hospitality has been greater than average.
This is according to the Franchise Lending Index from the International Franchise Association (IFA) and BoeFly, the premier online marketplace connecting small business borrowers with lenders and a strategic ally of IFA to expand credit access within the franchise community.
The Index also found that despite a 0.49 percent drop in franchise lending in March, the year-over-year performance for lending to franchise businesses has been more positive, with a gain of 3.18 percent from March 2011 to March 2012.
The IFA/BoeFly Franchise Lending Index is created from a monthly analysis and integration of both proprietary data from BoeFly’s marketplace and franchise loan data from the Small Business Administration (SBA).
BoeFly’s data is collected in real-time based on the activity of more than 2,200 community, regional, and national lenders who use BoeFly to most efficiently source franchise borrowers. The SBA data used in the analysis dates back to 2002 and covers more than $20 billion in franchise loans.
In connection with the Index, BoeFly analyzed the distribution of loans across industries comparing franchise versus non-franchise loans. The data analyzed was from March, the most recent available period.
While just 9.6 percent of SBA loans analyzed by dollar amount were extended to franchise businesses, the most active industries witnessed greater-than-average distribution to franchises. Specifically, franchisees received 49.3 percent of all limited-service restaurant loans, 47.3 percent of hotel loans, 31.1 percent of loans to all gas stations with convenience stores, and 14.9 percent of all full-service restaurant loans.
“The drop in franchise lending is an unfortunate symptom of today’s challenging credit market, but the positive news is that lending to franchise businesses has remained fairly steady year over year, showing stable long-term growth,” says Mike Rozman, co-president of BoeFly.
“It is also positive to see higher-than-average levels of credit access among franchisees in large industries such as food service and hospitality, which demonstrates that these franchise businesses are growing even in the wake of the financial crisis. We anticipate that these businesses are poised for further growth in the coming months.”
“We are very glad to see that franchise businesses, especially those in some of the largest sectors, are getting more access to capital over a long-term period, but the industry is still facing a shortfall in lending that has limited franchise growth and job creation since the start of the recession,” says Steve Caldeira, IFA president and CEO. “Our hope is to see lending steadily increase over the next several months, but more certainty in the tax and regulatory environment would go a long way towards ensuring a full rebound to lending levels that meet demand for franchise industry growth.”