The International Franchise Association recently hosted the Small Business Lending Summit, an event designed to help IFA members access credit and spur business growth. Franchisors, franchisees and bankers were all in attendance with a single goal in mind: to work together to accelerate job growth.
According to National Restaurant Association COO David Gilbert, small business lending is a big hurdle for restaurants, with 44% of quickservice operators reporting more difficulty securing funding in 2010 than in 2009. However, growth in franchising is closely tied to growth in the overall economy. The Franchise Business Economic Outlook: 2011 shows that franchising growth as a whole is growing at just below 5% for 2011, which is slightly faster than the economy at large.
So how does a business overcome the key hurdle, a lack of access to credit? One of the Small Business Lending Summit’s panels, “A Lender’s View on the Credit Crunch,” examined that very issue. The panel, which included executives from the National Association of Government Guaranteed Lenders, Regions Financial Corp. and Huntington National Bank, discussed what franchisees and franchisors can do to help secure credit with banks.
- Choose your bank wisely. Select a bank that has expertise in small business or franchise lending. Ask upfront if a bank is interested in franchise lending. Make sure that the bank adequately covers your footprint, whether it’s local, regional or larger.
- Educate your bank. Present the bank with data and history about your franchise or brand. Banks want to mitigate their risk. The more information and documentation you have to prove the viability of your business, the less risky it appears to the bank. This isn’t just advice for franchisees. Franchise companies can do their part by educating banks about their brands by offering information including sales plans, marketing support for franchisees, HR support and product development.
- Develop a relationship with your bank. Bring your whole relationship to the bank where you get credit. The bank will give you a better rate if you also sign up for services such as deposits, cash management, etc.