SBA Administrator Testifies Before Congress, Tells of Progress in Assisting Small Business Owners

On Thursday, Jan. 7, the House Committee on Small Business held a hearing on the status of the U.S. Small Business Administration (SBA), and heard testimony from SBA Administrator Maria Contreras-Sweet as the lone witness.  Although the hearing was convened to address a recent report by the Government Accountability Office (GAO) that criticized the SBA for its failure to implement management recommendations dating back several decades, the Administrator took the opportunity to highlight the areas where SBA has succeeded in serving America’s small business and helping them continue to grow the economy.

In her testimony, Administrator Contreras-Sweet emphasized that, despite the criticism from the GAO and the Committee, FY 2015 was one of the most successful years in the history of the agency.  SBA backed 22 percent more loans to American small businesses, with a 23 percent increase in the dollar value of those loans compared to FY 2014.  Although lending to small businesses has increased in the years since the recession, she said, it has only returned to 84 percent of its pre-recession level, making the SBA’s role in helping small businesses secure vital financing even more important.  In addition, Contreras-Sweet shared that loan approvals to women in the flagship 7(a) loan program increased 29 percent over 2014, while loan approvals to minorities increased 27 percent and those to veterans increased 47 percent.  All of this progress, the Administrator noted, occurred while the 7(a) program has operated at zero-subsidy, with no direct cost to taxpayers.

The well-established 7(a) program is paramount in ensuring that qualified small businesses, especially franchise businesses, are able to survive and increase their production in a fragile economy.  In 2014 alone, SBA lending programs were used in the financing of nearly 30,000 new franchised units and guaranteed an estimated $6 billion in loans to new and prospective franchisees.  That number is likely to increase since SBA lending for the 7(a) program increased by 23 percent in 2015.  In 2015, nearly a quarter of all new single-unit franchises were financed with the help of SBA loan guarantees, with 17 percent of medium-sized multi-unit franchisees and 19 percent of large multi-unit franchisees utilizing SBA-guaranteed loans to expand their operations.  According to IFA estimates, for every $1 million in lending to a franchise, 40 new direct and indirect jobs are created.  These figures show that SBA loan programs are a vital lifeline to franchises and other small businesses as the small business lending market continues its recovery.

Although the Administrator focused on many of the agency’s high points, the Committee members sought clarification on the Administrator’s plans to address management deficiencies in cybersecurity, staff retention, and disaster relief programs.  Committee Chairman Steve Chabot (R-OH) pressed the Administrator for a commitment to addressing the GAO report’s recommendations, explaining that 62 of the GAO’s 69 recommendations have not been implemented.

IFA submitted a statement for the hearing record praising the SBA for its essential loan programs, while stressing the need for continued recognition of the needs of small business owners in the U.S. Congress.  The Committee will continue with its series of hearings on the oversight of the SBA this week.  SBA Associate Administrator of Capital Access Ann Marie Mehlum and Linda Rusche, Director of the Office of Credit Risk Management will testify on the status and management of the SBA’s capital access programs tomorrow at 10:00am ET.  For more information on last week’s hearing, or for more information on this week’s activity, click here.

IFA partners with The UPS Store, SBA Administrator Mills, Mass. Lt. Gov. Murray to support veterans


On Veterans Day, IFA President & CEO Steve Caldeira joined SBA Administrator Karen Mills, Massachusetts Lt. Governor Tim Murray and Stuart Mathis, President of The UPS Store ® to announce a partnership to help veterans own franchise small businesses at a The UPS Store ® location owned by Jamie Salisbury, a veteran small business owner.

Steve Caldeira, IFA President and CEO alongside SBA Administrator Karen Mills and Mass. Lt. Governor Tim Murray at a The UPS Store ® in Boston.

The event followed The First Lady Michelle Obama’s announcement Nov. 10 that the franchise industry committed to hire or recruit 80,000 veterans as employees or small business owners by 2014, including 5,000 Wounded Warriors, as part of the IFA’s Operation Enduring Opportunity campaign.

“We are very pleased to partner with the SBA and Administrator Mills for this important initiative,” said IFA President & CEO Steve Caldeira at the event. “The SBA has been a lifeline to small businesses during the economic downturn, and with tens of thousands of service men and women returning home, increased opportunities for employment and small business ownership are critical to help veterans who served our country.”

The visit included veterans who have found career stability and success in franchising. According to a recent study based on U.S. Census data, there are more than 66,000 veteran-owned franchise establishments in the United States, providing jobs directly for 815,000 Americans, many through the IFA’s VetFran program, originally established in 1991, and subsequently re-vamped after 9/11. Responding now to veteran unemployment rates of 11.5 percent (22 percent for veterans under 25 years old), IFA is launching Operation Enduring Opportunity to offer returning veterans career paths in franchising including employment and ownership on a broader scale.  


SBA Administrator Karen Mills, Steve Caldeira, IFA President and CEO, Massachusetts Lt. Governor Tim Murray, and Stuart Mathis, President of The UPS Store ® visit with Captain Jamie Salisbury, a UPS Store Franchisee, and U.S. Army Veteran in Boston on Veterans Day. 

“We often speak about the sacred trust we have with our service men and women, and one way we honor that trust is ensuring they have every possible opportunity for success,” said SBA Administrator Karen Mills. “On this patriotic day, it is only natural for us to reflect on our nation’s veterans who have the leadership skills and experience to become successful entrepreneurs and small business owners. The impact of this initiative will mean veterans and their families will get the chance to pursue their dreams as entrepreneurs and create jobs to drive economic growth at a critical time for our country.” 

Jamie Salisbury, a The UPS Store franchisee, served in the Army for three years—in Colorado, South Korea and Fort Devens and secured his first loan to open a The UPS Store franchise through the SBA. Today, he owns four The UPS Store locations in the greater Boston area.

The UPS Store ® has a long history of veteran support. Approximately 150 The UPS Store locations have opened under the VetFran program, a total financial incentive valued at more than $700,000.

On Nov. 9, The UPS Store ® announced new financial incentives, valued at approximately $300,000, to help up to 10 qualified U.S. military veterans open their own locations as part of a national initiative unveiled by the White House.

“We are extremely proud of our franchisees, especially those who are military veterans,” Mathis said. “Veteran unemployment rates of 11.7 percent – 22 percent for veterans under 25 years-old – are undeserved among the men and women who have honorably served to help keep our nation free.”

Posted by Matt Haller, IFA Sr. Director of Communications


Small Businesses, Lenders Tell Congressional Panel Credit Gaps Remain


Witnesses from the IFA and other organizations testifying at a House Small Business Committee hearing Wednesday told lawmakers that a harsh regulatory environment continues to restrict access to credit for small businesses.

“What we found is that the FDIC regulators are inconsistently applying regulations throughout the banking community,” said Lynn Ozer, executive vice president of Susquehanna Bank in Pottstown, Pa., representing the National Association of Government Guaranteed Lenders. “That is what has been reported to the trade association.”

IFA’s Credit Access Task Force Chairman Bill Hall, CFE, a five-unit Dairy Queen franchisee, said that without additional access to  credit, he will lose customers in the highly-competitive quick service restaurant industry. “I need to borrow money to renovate my stores just to keep up with the competition,” he said. “Otherwise I’ll go out of business.” For the first time in his life, he said, he will seek an SBA loan, because commercial credit is so tight.

Hall was invited to testify on behalf of IFA’s 825,000 franchise establishments across the United States that  account for nearly 18 million jobs.

Rep. Allen West (R-Fla.), who arrived at the hearing from a meeting at the White House with President Obama and Treasury Secretary Timothy Geithner, pressed the panelists about what Congress can do about the gaps in the credit market.

“I want to know if banking regulators are causing this hang-up and what we can do about it. Are borrowers and bankers being inconsistently treated by regulators?” West asked.

“With nearly 14% unemployment in my district, I’m concerned about the small guys getting credit,” said Rep. Jaime Herrera Beutler (R-Wash.). “It’s the quickest way to get job growth in our economy. We have to support small business.”

Government and industry statistics indicate that SBA loans have provided a lifeline to small-business growth over the past year. But lenders say those loans may be discouraged by regulators.

“There is a bias against SBA loans by regulators,” said Ozer. “They [SBA loans] are sometimes put in a high-risk category, which affects how reserves are calculated.”

IFA, NAGGL and the Consumer Bankers Association, which also testified at the hearing, are ramping up efforts to call attention to the problem. The message resonated with some lawmakers.

“Banks in my district had nothing to do with the financial crisis,” said Rep. Mike Coffman (R-Colo.). “They think there was an overreaction by regulators.”
Some Committee members echoed the IFA’s call for increased credit flow to franchising.

Rep. Mick Mulvaney (R-S.C.), a former franchisor and franchisee in the restaurant industry, said, “There is pent-up demand out there for growth,” Mulvaney said. “This is the way to create jobs. If financial regulators are impeding that credit flow, we need to do something about it.”

Full video of the hearing is available on the Committee’s YouTube page

Posted by Matt Haller, IFA Director of Communications

Franchise industry continues to build relationships with SBA


IFA Franchise Congress member Amy Nichols (Dogtopia, MD) with SBA Administrator Karen Mills

The IFA participated in the U.S. Small Business Administration’s National Small Business Week to highlight its expanded Credit Access Campaign. A sponsor of the week’s events, the IFA has been linked throughout the year with SBA’s “Jobs Act” small business nationwide tour. IFA’s Franchise Congress key contact advocacy group has been instrumental in building relationships with the SBA; Franchise Congress member Amy Nichols, franchisor of Dogtopia, MD, attended the Small Business Week event.

In addition, the recent SBA Jobs Tour Round table in Seattle, WA on May 9 was attended by Franchise Congress members Phyllis Pieri (Your Franchise Coach, WA), and Jerrod Sessler (HomeTask, Inc., WA), along with IFA member Barbara Carper-Ness (Profit Soup, WA). They had great success in broaching the subject of bank lending to franchises, as well as strengthening entrepreneurship in small markets. A special thanks to the continued involvement of IFA’s Franchise Congress at these key regional events!

IFA Franchise Congress member Phyllis Pieri (Your Franchise Coach, WA) with the SBA’s Steven Smits

IFA celebrates National Small Business Week


In conjunction with its sponsorship of the U.S. Small Business Administration’s National Small Business Week May 16-20, the IFA announced an expanded Credit Access Campaign to unleash much-needed credit flow from lenders to create more than 333,000 new franchise industry jobs and 41,000 new franchise business establishments in 2011. 

A newly-produced IFA video highlights the economic impact of franchising and the challenges posed to the industry and the lending community as the nation pursues economic recovery. 

There are over 825,000 franchise businesses across 300 different industries creating nearly 18 million jobs and generating over $2.1 trillion to the U.S. economy, according to data prepared for the IFA by PwC. Yet a 20 percent lending shortfall to franchise businesses in 2011 is significantly impacting the ability of franchising to create jobs, according to the latest IFA Small Business Lending Matrix & Analysis.

“Franchise businesses can accelerate job creation faster than other businesses. As evidenced by the industry’s 40 percent economic output growth rate over the past decade, if given adequate financing and a strong pro-growth legislative and regulatory environment,” said IFA President & CEO Steve Caldeira. “Due to its structured, scalable and proven business model, we believe franchising offers exactly what lenders are looking for- a lower risk way to generate revenue in a still uneven economic recovery.”

The Credit Access Campaign will build on the strong momentum of the Lending Summit with a combination of educational, technical assistance and policy initiatives with partner organizations in the business and lending communities, such as the event IFA participated in with the nation’s top small business lenders earlier this month in conjunction with NAGGL.

IFA leaders will be speaking at franchise and lending-related events throughout the country on the advantages of franchise lending, and to better educate and develop stronger relationships between franchisors, franchisees and lenders. For a full list of events, visit the IFA Credit Access Portal

The campaign will allow partners to collaborate on private-sector solutions that will enable long-term job creation and economic growth. Additionally, a Joint Working Group will also advocate for pro-business, pro-lending legislative and regulatory efforts, including meetings with the Federal Deposit Insurance Commission in June, and with federal lawmakers during the IFA Public Affairs Conference this September in Washington, DC.

The Credit Access Campaign will also feature discovery days for lenders to learn more about franchise brands and the wide-spread support they offer to franchisees to enable their ongoing success. IFA and its campaign partners will develop webinars to help franchisors and franchisees to be better prepared in their quest to receive bank loans, while also working with lenders to assist them in becoming more knowledgeable and comfortable with lower risk, franchise lending.

IFA will develop a Web-based Franchise Lending Portal for franchisors and franchisees to include step-by-step instructions and an online platform to connect lender-ready franchise borrowers. A task force including CBA, NAGGL, CIT, NRA, and IFA is developing a standardized loan profile to provide the information lenders want to see when evaluating a franchise loan applicant. 

As part of this effort, a National Franchise Premier Loan Network will be established for franchisors and lenders who agree to meet pre-determined standards to be part of a “best-in-class” group of lenders, franchisors and franchisees-to facilitate deal flow among the participants.