While media reports suggested that the nation’s economic skies were brightening this summer before the debt ceiling debate and the nation’s credit rating downgrade, access to capital remains a challenge for many current and prospective franchisees, and therefore franchise system operators. An estimate by FRANdata, disclosed during the April 2011 International Franchise Association’s Small Business Lending Summit, forecast that only about 80 percent of the loan demand projected by franchisors will be able to be met by banks, resulting in a $2 billion shortfall in 2011 franchise lending.
The resulting competition among franchisees for lender attention will amplify the inefficiencies and instability already present in the small-business lending system. It will also cause thousands of lost opportunities for franchisors and franchisees alike, unless aggressive action is taken.
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