Franchisors Look To Decipher New Lending ‘Paradigm’

IndUS Business Journal:

The franchise industry has typically benefited from downturns because many professionals turn to it for new career options. Industry insiders expect the same to hold true today, but the uniqueness of the credit and loan crisis is having a dramatic impact on franchising financing, which may dampen industry growth.
industry

In a recent online seminar, the International Franchise Association – brought together a panel of experts to discuss franchise financing in today’s economy and the message was pretty clear: forget the past; the current downturn is changing all the rules in regards to the franchise industry, particularly in terms of financing.

Headquartered in Washington, D.C., the association pledges to protect, enhance and promote the franchise industry. It has a membership of 1,300 franchise systems, 11,000 franchisees and 500 vendors.

Darrell Johnson, president of FRANdata, an Arlington, Va.-based research company that tracks franchise systems and their performance, called what is happening to franchise financing in the current economy “a real paradigm shift.”

According to Johnson, preferred lenders now prefer not to lend, conventional lenders are mostly sidelined, local lenders are taking over from national lenders and credit departments rule the lending process more than anything else.

Banks have changed their approach in lending to franchises, now looking to “not lose money” compared to “make money,” he said.

Read full article.

Leave a Comment

Your email address will not be published. Required fields are marked *