For prospective and existing franchisees, a dearth of credit will remain a major hurdle this year to opening up new units or transferring ownership of existing ones, a new study shows.
Banks are expected to lend $8.4 billion to franchises this year, an amount that is projected to fall $2 billion short of demand, concludes a study prepared by Arlington-Va., research firm Frandata on behalf of the International Franchise Association, a trade group in Washington. The reason, it speculates, is that banks are still reeling from the housing crisis, which continues to persist.
To be sure, the anticipated 20% lending gap represents a slight improvement over 2010′s estimated 23% gap, thanks to greater investor interest in franchises and increases in Small Business Administration-guaranteed loans, among other factors. In 2010, banks doled out an estimated $7.8 billion in loans to franchises, according to the report.