Franchisers Becoming Lenders

June 22, 2010
When an established businessman with good credit could not get a fair loan, he turned to his franchiser for financing. Facing a $3.4 billion credit shortfall, franchisers are offering new financing approaches and incentives.

The New York Times’ Kermit Pattison reported that, “Chains are facing the worst credit squeeze since the franchise model boomed in the years after World War II. This year, the franchise industry is expected to seek $10.1 billion in capital, but banks are expected to lend only $6.7 billion, according to the International Franchise Association.

“The big national companies that dominated franchise lending before the 2008 collapse have stopped or reduced financing. The remaining lenders — often local banks — have been more restrictive in their credit underwriting, and they have been demanding more collateral (like home equity), more cash liquidity, more experience in the industry and outside sources of income, like rental income or a working spouse.”

To read the complete article by The New York Times’ Kermit Pattison go to: Tight Credit Is Turning Franchisers Into Lenders