Financial Update: Franchises See Increase in Lending, Sources

(Franchise Buy) - By SystemUser - BlogMigration. Updated Apr 19, 2013

 Lending has been a thorn in the franchise industrys side since the recession. Though capital is difficult to produce for any startup, joining the franchise industry presents its own special obstacles. As many concepts require a franchisees possess a certain net worth or liquid assets, entrepreneurs must satisfy two sets of prerequisites, jumping through countless hoops. Despite a franchise concepts history of success many banks remain hesitant to loan. That said, the tables are turning and franchise lending numbers have been slowly increasing since 2010. After a one month hiatus at the beginning of 2013, the International Franchise Association and Boefly are both reporting that lending has increased almost 3 percent from February to March. Year over year, the Franchise Business Index is up 1.28 percent. While traditional lending is increasing, non-traditional lending sources are also becoming popular: the franchises themselves. Franchisors are becoming increasingly involved in the lending process, helping franchisees find capital by lending directly, guaranteeing loans and signing as equity partners. Franchisors arent handing out money to just anyone. Much like a bank, franchisors will only lend to those who are qualified. For example, Hurricane Grill & Wings created a $10 million dollar fund to help qualified current and new franchisees develop new units. Jersey Mikes doles out funds to franchisees whose locations need an update so all units appear uniform. And, much like a bank, each franchise concept has their own requirements. The current lending environments changes should signal to all the aggressive stance all franchise players have taken. Though the franchise industry continues to grow, competition for consumers dollars remains stiff.