Lending to franchises is up 10%, the highest level since the recession, according to FRANdata for the IFA educational foundation. Despite the rise in lending, the amount is still roughly $2.6 billion short of demand.
The IFA credits the favorable increase in lending to a higher demand for franchise transactions, greater franchisor capacity for growth, increased lending ability by banks to franchisees, increased willingness for both SBA and conventional lenders to finance franchisees and a moderate pace of economic recovery through 2013.
“Franchise growth is inextricably linked to the availability of small business lending and we are pleased to see a positive trend in the availability of capital to existing and prospective franchisees,” said IFA President & CEO Steve Caldeira in a recent press release. “Franchising remains the most viable business model in the world to quickly grow and scale a business. The surge in lending to franchises since the recession reflects the continued popularity of franchising as a means for investors to go into business for themselves, but not by themselves. Many lenders often view franchising’s proven, structured and scalable business model as a lower risk profile due to the support many franchisors are offering franchisees during the economic recovery.”
Direct Capital is right on board with the increase in franchise lending, recently announcing a commitment to deliver $300 million in 2013 to the franchise space and will continue to build new programs tailored specifically for franchisees.
Though an increase in lending is certainly positive, significant improvements are needed in order for every franchisee to get the financing they need for remodels, upgrades, and new stores acquisitions. Nontraditional, or specialty lenders, like Direct Capital, are a great resource for franchisees looking to avoid the hurdles of a bank loan.
Direct Capital is a leading nationwide provider of equipment leasing, business loans, and working capital.