Posted on January - 05 - 2010
Absence of Capital Damaged Many Franchises in 2009
Franchises had a difficult 2009. Lack of access to financing made it difficult for many franchises to invest and grow. With an industry-wide loss of 409,000 jobs, franchises are looking for broader sources of funding.
According to the Richmond Times-Dispatch, banks and lenders are setting the bar higher than ever to lend money to a franchise.
Franchise lawyer Jim Wilson, of Wilson Stoyanoff PLC in Henrico, said some major lenders who helped finance start-ups and franchisees aren’t in that market anymore.
The tried-and-true lenders who are still around — “it’s not that they’re not doing loans,” he said. “But you’ve just got to make a very compelling story, not only for your ability to pay it back, but they want an absolute guarantee of what’s backing the loan.”
There remain, however, many options for recently downsized corporate workers looking to create new opportunities for themselves. Not all franchise sectors are experiencing a decline in business. Growth areas include personal services and senior care. Applications for new franchises also continue to grow. According to franchise placement agencies, applications for new franchises are up for the year.
Jania Bailey, chief operating officer of FranNet, a Louisville, Ky.-based organization that matches people with a franchise company, said her group saw strong growth in 2009.
“Our placements are 35 percent ahead through November 2009 over where we were in 2008,” she said. In Virginia, “we’re probably 25 percent ahead of 2008,” she said. “Our Virginia market is a robust market. We’re seeing a lot of activity there.”
To read the complete article, click here.
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