During the first six months of 2011, BoeFly’s deal database revealed that a greater number of bankers requested to review loan requests made by franchise borrowers than independent business owners. Specifically, over 1,000 BoeFly bank members requested to make detailed reviews $500 million of loan requests posted on BoeFly by small business borrowers. Upon further analysis, BoeFly’s activity trends indicate the franchise start-ups receive fifteen percent more lender requests than independent business start-ups. BoeFly’s deal data indicates a movement towards increased bank-franchisee lending relationships because of the lower risk associated with financing franchises.
Additional BoeFly activity trends support the notion that bankers view franchisee loan requests as lower risk. For example, franchise owners looking for working capital loans receive 47 percent more lender requests than an independent business. Also, franchise owners looking to refinance loans receive 18 percent more lender requests than an independent business. These statistics illustrate bankers increased interest in making deals with franchisees nationwide.
“BoeFly’s analysis confirms what we at the IFA have long maintained: that franchise loans are a lower risk alternative for business lenders,” said Steve Caldeira.
“I’m gratified to see that BoeFly’s bank members clearly believe in the franchise business model as evidenced by their increased activity on franchise deals. BoeFly’s ability to efficiently connect franchisees and lenders is why we are so pleased to have them on our Credit Access Joint Working Group.”
“The fact that BoeFly bank members show a strong interest in connecting with a franchise business is no surprise when you consider the methods, training and support franchise systems provide to their franchisees,” said Bill Hall, CFE, CEO, William G. Hall & Company, franchisee of Dairy Queen International, and chair of IFA Credit Access TaskForce. “As I told the House of Small Business Committee in my recent testimony, franchising combined with proper access to capital can be a true locomotive for job growth.” Each franchise’s system for methods, training, and support have been previously implemented at other successful franchise locations. Therefore, banks recognize that there is less guesswork when forecasting success of the franchisee.
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