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.

Franchisers, Lenders Huddle at Denver Lending Boot Camp

On Tuesday, the IFA, the Denver Franchise Business Network (FBN), Faegre Baker Daniels LLP and FRANdata hosted a Franchise Lending Boot Camp in Denver to educate franchise leaders and lenders on the ways to increase small business lending in the recovering economy.  According to the Small Business Lending Matrix & Analysis, Vol. 5, produced for IFA by FRANdata in April, lending to America’s franchise businesses will reach $23.9 billion in 2013, the highest level since the recession, yet will still fall short of demand.  Access to capital has remained an important issue for franchise owners throughout the recovery.


Stephen Olear, Chief Franchise Council in the Los Angeles office of the U.S. Small Business Administration (SBA), addressed attendees on ways the SBA is working to increase lending to small businesses in general and franchises specifically.  Because of the unique partnerships between franchisors and franchisees, and the stability the franchise model provides, franchise owners generally make good loan candidates.  Olear announced that a new pilot program has launched this year to pre-approve more franchises for SBA-guaranteed loans by making updates to SBA procedures and to the SBA Franchise Registry.  Edith Wiseman, Exec. VP of Client Solutions at FRANdata, spoke about the registry and its role in helping connect franchises and lenders.


Steve Olear of the U.S. Small Business Administration addresses Franchise Lending Boot Camp participants in Denver.

A group of franchisors engaged in a panel discussion entitled: “How We Get Our Franchisees Financed.”  Panelists included Greg Esgar of Massage Envy, Rachel Williams of Mrs. Fields Famous Brands, and Reginald Heard of Focus Brands.  The franchise executives discussed strategies for making their franchisees more loan-ready, and their efforts to help franchisees secure financing during the depths of the recent recession.


Following the presentation from the franchisors, a group of lenders shared their insights on what makes great financing candidates, and how businesses can better prepare themselves to apply for financing.  Among the lending panelists were Julie Huston of U.S. Bank, Dave Otteson of BBVA Compass, and Ken Allen of Evolve Bank & Trust.


Attendees later gathered for a reception and dinner at the Denver Country Club, where participants mingled and shared what they learned.  Olear again addressed the group to review the progress that has been made in the past few years on increasing lending to small businesses, and applauded the collaboration of the franchise and banking industries in their hard work to improve the lending environment for all.

Live Blog: Pose Your Franchising Questions for the IFA Annual Convention


Link: Live Blog: Pose Your Franchising Questions for the IFA Annual Convention

While 3,000 franchise executives and small business owners will descend on Orlando beginning this weekend, many in the franchise industry will be busy running their businesses and not making the trip to Orlando.

For those who can’t be here for the biggest event in franchising of the year, you can follow along some of the action through a live blog with The Wall Street Journal On Sunday, Feb. 12, as WSJ small business reporter Emily Maltby will participate on a Financial Summit panel with experts in franchise development and franchise and small business lending. 

Given the 20 percent lending shortfall the franchise industry faced in 2011 and the forecast for a return to franchise establishment growthin 2012, it’s sure to be a timely and lively discussion. 

The lineup includes Ron Feldman, CEO of Franchise America Finance; Mary Jo Larson, Publisher, Franchise Times; and Darrell Johnson, President & CEO, FRANdata.

Send the WSJ your questions and comments, both in advance and during the live blog, which will begin on Sunday at 9 a.m. ET.

Posted by Matt Haller, IFA Sr. Director of Communications

Denver franchise execs host first-ever “lending bootcamp”


Leaders of the nation’s small business credit access campaign arrived in Denver July 19 for Faegre & Benson’s first-ever “lending bootcamp” spearheaded by Faegre partner and IFA Supplier Forum board member Kevin Hein as part of the FBN’s annual dinner at the Denver Country Club.

IFA Credit Access Task Force Chairman and Dairy Queen franchisee Bill Hall, board members Shelly Sun, co-founder of BrightStar Care, Inc., and Darrell Johnson, President & CEO of FRANdata, headlined the event, drawing support from finance leaders such as U.S. Bank SBA Division President Julie T. Huston of San Diego, Mike Owen, COO of CDC Small Business, which has provided more than $8 billion in SBA lending. Huston and Owen represented the National Association of Government Guaranteed Lenders (NAGGL) and the National Association of Development Companies (NADCO), the trade association for the nation’s Certified Development Companies (CDCs), lenders certified by the U.S. Small Business Administration (SBA) to provide financing to small businesses through 7(a) and 504 programs.

The seminar of strategies and solutions to the financing dilemma included David Nayor, Executive Vice President of BoeFly LLC, the online lending source for franchising, and David Nilssen, founder of Guidant Financial, which offers tax-advantaged financing strategies for business leaders.

“This was an unprecedented event in Denver,” said Faegre’s Hein. “We are grateful for the impressive response to our ‘lending bootcamp’ and are proud to bring together the nation’s lending and franchise leaders to improve credit access for franchisors and franchisees.”

IFA President & CEO Steve Caldeira has led the effort to address franchising’s number-one issue, which will be the focus of this year’s IFA Public Affairs Conference Sept. 13-14 in Washington.

“It’s great to see leaders like Kevin Hein and Faegre taking the IFA’s Credit Access Campaign across the country,” said IFA Credit Access and Dairy Queen franchisee Hall. “Franchisees, franchisors and lenders are looking for this kind of leadership. The education and the networking are critical to help create the jobs our country needs.”

“As a franchisor, I know that all of us need to be engaged in innovative approaches to help our industry grow,” said Sun. “I am proud to be part of the effort.” Sun was quoted in The Washington Post days after the event on her views on the U.S. economic outlook.

Faegre & Benson’s annual Franchise Summit, led by partner and IFA Credit Access Working Group member Brian Schnell, takes place Aug. 11-12 in Minneapolis with a focus on accessing credit and financing solutions.

More information here.

“Unchanged” Diagnosis for Ailing Economy


The first six words of the Labor Department’s June report on jobs says it all – “Nonfarm payroll employment was essentially unchanged. . .”  More than 14 million Americans are unemployed.  Of these, 6.3 million are classified as long-term unemployed.  More than a half million Americans have lost their jobs since March.  Add to the 14 million an additional 8.6 million Americans who are classified as “part-time for economic reasons”.  These are American workers whose hours have been cut  or who are working part-time because they have been unable to find full-time work.  And in each section of the report, the code words are “unchanged”, “no improvement”, “essentially flat”. 

Many years ago, Senator Jennings Randolph told the story of his first meeting as a young congressman with President Franklin Roosevelt.  During the depths of the Great Depression, President Roosevelt called a meeting in the White House of Congressional leaders, business leaders, scientists and educators.  His first words were, “Gentlemen, we must act, the time for debate is over.  We must act now.”

IFA leaders have urged congressional leaders and administration officials to take such action on three fronts.  First, examine recently imposed financial regulations that are restricting the flow of capital to small businesses.    House Small Business Committee Chairman Sam Graves (R-MO) agreed with IFA, saying that forcing banks to keep more capital in reserve has stifled borrowing.   ‘We’ve got to untie the hands of these lending institutions,’ Graves said. ‘It’s ridiculous what you have to jump through.’”

Second, IFA has urged Congress to increase support for the SBA 7(a) loan program.  At the current pace, the 7(a) program will hit its $17.5 billion authorization cap before Sept. 30.  IFA leaders have urged Congress to increase the 7(a) lending authorization limit to $19 billion before it leaves town for its August recess.

Third, IFA leaders have called on Congress and the Treasury department to redirect a portion of the $30 billion Small Business Lending Fund to support an expanded loan program for small businesses.   Only a fraction of the fund has been distributed and many community banks have expressed no interest in receiving funds due to the governmental red tape.

Franchisors and franchisees understand that “unchanged” is not a winning strategy.  Businesses must grow and expand, adding new products and services, to win more customers.  A greater sense of urgency and a call to action by both government and business leaders is needed to “change” our ailing economy for the better.     

Posted by John Reynolds, President, IFA Educational Foundation