Obama Administration Plans To Allocate More Funds To Help Franchisees

There has been a shift in priorities for the stimulus, as President Barack Obama publicly announced that much of the bank bailout funds will instead be going to …

There has been a shift in priorities for the stimulus, as President Barack Obama publicly announced that much of the bank bailout funds will instead be going to community banks with an aim of helping small businesses. The International Franchise Association approves this move and believes that it will be helpful for the 400 different small franchises in the country that meet the Small Business Administration’s loan limit, a limit that the White house is attempting to raise. For more on this, see the following article from Blue Mau Mau.

President Barack Obama announced plans Wednesday afternoon to shift some of Wall Street’s bailout funds over to community banks in order to spur lending to small businesses, which has slowed to a trickle. With SBA administrator Karen Mills and Secretary of the Treasury Tim Geithner flanking him, President Obama made several announcements to boost small business.

The President’s speech took place at Metropolitan Archives, a family-operated records storage company in Landover, Maryland.

President Barack Obama, who as a high school student served ice cream in a Honolulu Baskin Robbins franchise, described how small business owners and their tireless work ethic form the backbone of the American economy. “Hewlett-Packard began in a garage. Google began as a research project. McDonald’s started with just one restaurant,” he said.

The President went on to say that although small business creates 65 percent of all new jobs, small businesses have been some of the hardest hit by the recession. “From the middle of 2007 through the end of 2008, small businesses lost 2.4 million jobs,” said the President. “And because banks shrunk from lending in the midst of the financial crisis, it’s been difficult for entrepreneurs to take out the loans they need to start a business. For those who do own a small business, it’s been difficult to finance inventories and make payroll, or expand if things are going well.”

The White House is requesting that Congress increase Small Business Administration 7(a) and 504 loans, used by small business owners to typically buy equipment, land and buildings, from the current cap of $2 million to $5 million.

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“These larger loans will help more small business owners and franchisees grow,” Obama declared.

The Administration plans to bring together regulators, congressional leaders, lenders and small businesses to discuss what steps are necessary to get the small business credit pump flowing again.

“I’m confident that the steps we announced today will do that for small business owners across the country, men and women we hear from every day,” said the president.

Franchisees Want Help

International Franchise Association CEO Matthew Shay thinks the loan cap increase is a good idea. During the year, the IFA has lobbied Congress, the Treasury, the Small Business Administration and the Federal Reserve to help change the lack of capital access for franchise chains. Those efforts seem to be bearing fruit.

“Administration officials noted that the desire to increase the size of the SBA loans was driven in part by meetings with large franchise corporations like Dunkin’ Donuts,” reports BusinessWeek.

“There are over 400 different franchise brands in the United States that have an average initial investment requirement of $750,000 to $2 million per unit,” observes Shay. “These franchised small businesses reach the SBA’s current loan limit of $2 million by the time they want to build the second or third store. By increasing the loan limit to $5 million, at an annual growth rate of 5 percent, these businesses could create 450,000 to 650,000 new direct and indirect jobs within the next 12 to 18 months.”

Obama announces new lending initiatives

The International Franchise Association, representing the needs of some 1,100 franchisors, arranged for franchisor members to invite their franchisees to attend the meeting. Franchisee Vinay Patel of JAI hotels, Meineke dealer Chris Schmitz, and other franchisees were in attendance, many are also members of independent franchisee associations.

Franchisee Chris Schmitz, also president of the Meineke Dealers Association, an independent franchisee association, said, “Ken Walker [CEO of franchisor Meineke] asked me to represent franchisees on behalf of the IFA.” Ken Walker, CEO of Meineke Car Care holding company Driven Brands, Inc., is scheduled to be the next chairman of the International Franchise Association.

Schmitz says that President Obama’s message was good news for all franchisees. “Including those looking for capital to make ends meet, expand their current operations, acquire additional units, or even those looking to sell or divest,” he elaborates. He adds, “Increasing the availability and flow of credit can be an integral part of revitalizing a down economy and stemming the tide of rising unemployment, provided the Congress follows through with the initiative.”

Dunkin’ Donuts franchisee Andy Cabral was also in attendance, and was pointed out in the President’s speech.

“Andy started his business on an SBA loan and now runs 10 stores across Maryland and Virginia that employ 130 people,” President Obama states. “And Andy has already seen one loan fall through the cracks because of the financial crisis and he’s hit the cap on his SBA loans. But the measure we’re announcing today will help Andy and other franchisees pursue their plans to expand and create more jobs.”

President Obama concluded the meeting, saying, “I know that times are tough and I can only imagine what many of you are going through, in terms of keeping things going in the midst of a very tough economic climate, but I guarantee you this: This administration is going to stand behind small businesses. You are our highest priority because we are confident that when you are succeeding, America succeeds.”

This article has been republished from Blue Mau Mau. You can also view this article at
Blue Mau Mau, a franchise news site.

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