Despite challenges, bankers upbeat about lending to franchise businesses

As part of IFA’s ongoing campaign to get America lending again – to franchising – IFA leaders spent the past three days strengthening relationships with the nation’s top small business lenders during the National Association of Government Guaranteed Lenders SBA Technical Conference in Atlanta.

At the recent IFA Small Business Summit in Washington, one of the key takeaways was a renewed commitment by franchise businesses and lenders to forge stronger and deeper communications channels and to develop a better understanding of the challenges and opportunities facing lenders and franchise businesses.

From left, IFA Credit Access Committee Chairman Bill Hall (International Dairy Queen multi-unit franchisee) and NAGGL President & CEO Tony Wilkinson

“These new relationships not only enhance communication with key groups in the lending community, but speak to the value franchise businesses will receive through the IFA,” said Karen Spencer, CEO of Fran Systems, a franchise industry consultant.

Richard Bradshaw, Senior Vice President and Head of SBA lending at TD Bank, the fourth-largest deposit bank in North America, with over 2,000 branches, said he welcomes IFA’s involvement and approach to engaging directly with small business lenders through NAGGL.

“The tie-in with IFA was excellent, especially talking with some of the IFA members,” said Bradshaw. “The networking makes that next call so much easier. I’m very excited about some of the introductions and will be following up.”

The primary goal of IFA’s campaign is to get lenders more comfortable with lending to franchising. Educating them on the virtues of franchise businesses versus non-franchised businesses is central to that goal. 

“The thing that I like about the franchise business is that because of the FDD [financial disclosure document] you get so much information, said Bradshaw. “I’m not sure the banks realize that. Because of the FDD you have a ton of information as to how that store should perform.”

For their part, many banks had not previously considered franchise lending a specialty segment of their small business lending divisions.

“Bankers are here looking for new markets in which to make loans, and it was very encouraging to see the partnership between NAGGL and the IFA,” according to John Kimball, Senior Vice President and Manager of SBA Lending at Park Midway Bank in St. Paul, Minnesota.

As part of the partnership between the IFA and NAGGL, new communications and prospecting tools are in the works to help streamline the lending approval process between lenders, franchisors and new franchisees.

“New resources such as internet-based referral services are going to provide community banks with enhanced access to helping the franchise industry,” said Kimball.

The IFA projects that without improved communication and lending to franchise businesses in 2011, 80,000 jobs will not be created and more than 8,000 franchise establishments will not be opened. 

IFA speakers at the event included IFA Credit Access Committee Chairman Bill Hall, Second Vice Chairman Steve Romaniello, Multi-unit franchisee Aziz Hashim, IFA Educational Foundation President John Reynolds and FRANdata President & CEO Darrell Johnson. 

Lenore Krentz, Chief Financial Officer of franchisor FOCUS Brands, said she appreciated the efforts of NAGGL and the IFA to make sure franchise leaders met the lenders at the conference, including the use of bright-orange name tags for franchises and navy blue for the lenders.

“I looked for the blue tags,” she said. “I was there a short a time but made connections with three groups that there is potential to do business with. I think that’s impressive.”

From left, Aziz Hashim (multi-unit franchisee, Popeye’s, Checkers Drive-In Restaurants/Rally’s, Subway and Moe’s Southwest Grill), Tom Burke (Wells Fargo Small Business Lending), Eddie Tuvin, (Cohen & Company), Phil Wilkins (multi-unit franchisee, Smashburger) and John Reynolds, IFA Educational Foundation. 

Posted by Matt Haller, IFA Director of Communications