Key to credit thaw is teamwork

More than 200 people convened for the summit in Washington, D.C., which was produced by the International Franchise Association. They shared their perspectives, frustrations and experiences as all parties seek to rebuild an economy that remains fragile.

A study conducted for the IFA found that $10.4 billion is needed to fuel necessary growth, but that only $8 billion is currently available. That so-called lending gap could further hamper the already-slow economic recovery.

“Without sufficient funding, franchise businesses will continue to struggle,” said Steve Caldeira, the IFA’s president and chief executive.

During discussions featuring more than 40 panelists, a picture emerged of two camps at a crossroads. Lenders noted they are eager to get more funding to businesses, but face higher regulatory hurdles and a more risk-averse mindset born of the financial crisis. Business owners spoke of too much government red tape and mountains of paperwork that still concluded in rejections from banks.

“I’m just going to wait to remodel,” said Bill Hall, an International Dairy Queen multi-unit franchisee and chairman of the IFA’s credit access committee, who is also a banker and joked that he turned himself down for a loan. “That means I’m doing fine, but if I were to remodel my sales would go up, I’d create more jobs and I’d hire a construction company.”

Mark Luppi, executive vice president and head of business banking at HSBC Bank U.S.A., N.A., and chair of the CBA Small Business Banking Committee, shared his key takeaways for all stakeholders.

Banks need to:

? Develop franchise programs and build relationships with franchisors

? Create a screening process that brings in high-quality applicants that can generate revenue

? Leverage programs such as those available through the Small Business Administration that drive the desired risk profile

? Look at every option to get to yes

? Create an incentive program that drives their sales force to seek out opportunities

? Move faster on loan requests

Franchisors need to:

? Build relationships with the banks in their markets

? Create an introduction for their franchisees

? Illustrate what they do to support franchisees

? Invite banks to discovery days and highlight their franchisee selection process

? Communicate their brand support and offer solutions for when liquidation is necessary.

“We’re all partners and always have been,” agreed Greg Clarkson, executive vice president and division manager, SBA Lending Division, BBVA Compass and chairman of the National Association of Government Guaranteed Lenders, or NAGGL. “There are 3,500 franchised concepts and 7,500 banks. That’s an enormous powerhouse of job creation. We need to focus on that. We can’t let time cure this issue.”