For example, California franchisees and small businesses saw lending dramatically decrease since the advent of the recession in 2007. A report released in December by the California Reinvestment Coalition found that business lending decreased by almost 1.5 million loans and $21 billion in California alone between 2007 and 2008.
"Taxpayers bailed out the banks to the tune of $700 billion and were promised that banks would increase lending to small businesses," said Alan Fisher, Executive Director of the California Reinvestment Coalition. "These small businesses employ half of all Americans, but instead of saving these jobs, banks turned their backs on small businesses and neighborhoods across the state."
However, in 2011, many are predicting things to look up for new franchisees seeking funds. In fact, as the economy is beginning to improve, government agencies have been increasing financial support to local business owners. The U.S. Small Business Administration announced this week that since the signing of the Small Business Jobs Act in late September, it had supported more than $12 billion in small business lending.
Luckily, even in a tight lending environment, there are a few tricks franchisees can employ to make their business dreams a reality.
Franchisees should first turn to their franchisor in the hunt for capital, Entrepreneur magazine writes. Lenders tend to be more willing to extend funding to applicants who have already been approved by the franchise system, especially if the franchisor has a previous relationship with the financial institution.
SBA programs are another option for franchisees. Since these loans are backed by the federal agency, protecting the lender in case of default, they are more willing to extend these to riskier clients and offer more favorable terms.
Even after being approved for a loan, franchisees financial considerations do not stop there. Unit owners must ensure that they create a viable and comprehensive plan to manage this money, growth and any potential downturns.
"Seat-of-the-pants management styles may be fine themes for business magazine articles and their Hollywood adaptations, but responding to the symptoms of problems instead of preventing problems in the first place is like taking aspirin to cure pneumonia," writes Steve LeFever, a contributor to Franchising.com.
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