Growth Of Franchise Businesses – Franchise Lending Is Up Compared To Last Year
Franchise lending is up about 6% from May 2011 to May 2012. QSRWeb.com gathered this information from the monthly Franchise Lending Index of the International Franchise Association (IFA) and BoeFly. BoeFly is an online marketplace accessed by lenders to find franchise borrowers. Its data is collected from over 2,200 lenders in the country. Some of the data also comes from the Small Business Administration or SBA. Mike Rozman, co-president of BoeFly says ”Having tools such as this index puts both franchisors and franchisees in a better position to understand and address the challenges associated with credit access so they can identify trends and opportunities for growth over the long term.” The data also reveals that a great portion of the loans extended are to franchise businesses in new locations.
Lending to franchise businesses saw a drop of about 0.5 percent from April to May, according to the monthly Franchise Lending Index from the International Franchise Association (IFA) and BoeFly, an online marketplace connectingborrowers with lenders. Despite the drop, however, year-over-year performance for lending to has gained 6.01 percent from May 2011 to May 2012.
The IFA/BoeFly Franchise Lending Index is created from a monthly analysis and integration of both proprietary data from BoeFly’s marketplace and franchise loan data from theAdministration (SBA). BoeFly’s data is collected in real-time based on the activity of more than 2,200 community, regional and national lenders who use BoeFly to source franchise borrowers.
“The slight drop in franchise lending over the past couple months speaks to the challenges of the current credit market, but it is positive to see that lending to franchise businesses has shown stable year-over-year growth,” said Mike Rozman, co-president of BoeFly. “Having tools such as this index puts both franchisors andin a better position to understand and address the challenges associated with credit access so they can identify trends and opportunities for growth over the long term.”
In connection with the Index, BoeFly explored the distribution of loans to new franchise units versus existing locations. For each of the previous two years, the percentage of loans extended to new franchise units remained steady at 47 percent. However, a closer analysis reveals that several franchise sectors and sub-sectors experienced an uptick in new-unit loan volume throughout the last 12 months in comparison to the preceding 12 months. For example, within the restaurant sector, which was flat period over period, the sub-sector of chicken/wing concepts jumped from 45 percent to 55 percent in new-unit lending.
“This analysis reveals that despite the small drop in lending volume, we see a greater portion of lending making its way to new locations, which is a positive trend for job growth,” Rozman said.
The SBA data used in the analysis dates back to 2002 and covers more than $20 billion in franchise loans.
Photo by MicDezCo