Franchisee Urges House to Promote More SBA Loans
WASHINGTON- A franchisee for the Great American Cookie Company testified on Wednesday before Congress on how the Small Business Administration needs to improve its small business financing programs. Lawrence “Doc” Cohen told the House of Representatives Small Business Committee that the Small Business Administration, an agency of the government that provides guaranteed loans to small businesses, that one of the fastest ways to kick start the economy is to focus on providing loans to franchised businesses because these types of small business offer the best opportunity for policymakers to promote a strong and sustainable recovery.
As a founding member of the Great American Cookie Company Franchisee Association, Cohen testified (pdf) before the House Small Business Committee how difficult the credit crunch is for those wanting new franchise locations. Operating 30 Great American Cookie stores in Texas and with a long and strong credit history, Cohen told the Committee what happened when he needed to add $500,000 to his line of credit at the end of 2008 in order to create two new cookie stores. Cohen stated, “I was told that I could borrow the additional $500,000 that I needed, but only if I agreed to keep $1 million in liquid assets on deposit with the lender.”
He declined the loan.
Cohen, who has also been a past chairman of the International Franchise Association, a lobbying group representing largely the interests of franchising firms, testified that the passage of the American Recovery and Reinvestment Act has not helped lessen the credit crunch for franchise buyers, who are still unable to invest in new stores. Franchising firms have been hard hit since they cannot sell franchises in this difficult credit environment, in which lenders aren’t willing to give out small business loans.
Citing IFA recommendations, Cohen said that the SBA should increase standard 7(a) loans from its current $2 million ceiling to $4 million. It should also guarantee 90 percent of a loan. He went on to say, "The real issue for many small business borrowers is not so much the cost of funds as it is the basic availability of funds. When SBA programs cap the interest rates that can be charged by lenders, the rules create a competitive disadvantage for small business borrowers."
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