IFA Urges Passage of Legislation to Enhance SBA Loan Programs
WASHINGTON, Oct. 21, 2009 - The International Franchise Association today welcomed President Obama's support to increase Small Business Administration loan limits from $2 million to $5 million, which if passed would pave the way for more franchise businesses to help create new jobs and set the country on the road to economic recovery.
"We thank President Obama for his support to enhance the SBA's loan program," said IFA President & CEO Matthew Shay. "We urge Congress to take the next step and pass legislation to increase the loan limits and make other important changes to the SBA loan program."
Shay and several IFA member franchisees joined President Barack Obama at a Washington, D.C. area business where he announced his support. The franchisees attending the event included: Vinay Patel, JAI Hotels, Mariana Huberman, The UPS Store #5259, Christopher Scott Schmitz, Meineke Car Care Center, and Maria Icaza and Andy Cabral, Dunkin' Donuts franchisees. President Obama said he supports increasing the SBA 7 (a) loan size from $2 million to $5 million to help provide medium-sized companies more sources of credit to expand and grow their businesses.
Franchise businesses play an important role in the U.S. economy. More than 900,000 franchise businesses operate in the United States today and provide for 20 million jobs and $2.3 trillion in economic activity.
"Fifteen percent of all small business franchisees in the United States own between two and five units, which is the fastest growing segment of our industry," Shay explained. "There are over 400 different franchise brands in the United States that have an average initial investment requirement of $750,000 to $2 million per unit. These franchised small businesses reach the SBA's current loan limit of $2 million by the time they want to build the second or third store. By increasing the loan limit to $5 million, at an annual growth rate of 5 percent, these businesses could create 450,000 to 650,000 new direct and indirect jobs within the next 12 to 18 months."
In January, IFA released an Economic Recovery Plan to help members weather the recession. The plan included recommendations for the SBA loan programs to increase access to capital for businesses. In addition to recommending the increase in the SBA 7 (a) loan program to $5 million, IFA urged the government to: expedite the SBA loan application process and make it less cumbersome; eliminate (temporarily) or sharply reduce SBA lender fees to increase the incentive for banks to make loans; allow market-based loan pricing so that SBA loan caps do not discourage banks from making loans; and promote sensible audit standards so that lenders will not fear losing their SBA guarantee after the loan is issued.
Throughout the year, IFA and its members have presented its recommendations to the Administration and Congress through testimony at multiple congressional hearings and meetings with Treasury, SBA and Federal Reserve officials. Capital access was a key topic during IFA's Washington fly-in when some 450 franchise business owners urged Congress to take step to increase access to capital.
"We thank President Obama for his actions and we thank the thousands of IFA members who made their voices heard this year through letters, meetings and calls with policy makers," Shay said. "Making SBA loan programs work better for entrepreneurs seeking capital to open, acquire or expand a business will allow the economy to recover faster and provide the necessary bridge to a functioning commercial lending market once the recovery is complete."
About the International Franchise Association The International Franchise Association, the world's oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of more than 1,100 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity.