IFA Members' "Business Model" Too Weak For Non-Guaranteed Lending?
Steve Caldeira, IFA's new president, is focusing his efforts to increase lending to the franchise industry. Caldeira is lobbying lawmakers to show them "the steps Congress can take to encourage more banks to lend to franchise businesses."
Apparently, loosening lending standards and having the government guarantee 90% of the loan is the only way banks will lend to these "proven, successful business models". Perhaps it would be easier for the IFA to recommend its members open their books to prove the true profitability of their systems. Showing the actual financial revenues of their franchisees should help "encourage more banks to lend to franchise businesses".
"Caldeira says that pursuing social and economic policies that conduce banks to begin lending again will be his top priority as he begins his tenure." As with the FNMA/FHLMC sub prime success, the IFA appears to be selling the same social/economic strategy.
According to Caldeira, franchising is crucial to U.S. job growth - apparently similar to the U.S. stimulus strategy. Without this lending "electricians lose jobs, drywall guys have nothing to do, and franchisee don’t hire." First, buildouts, et al, is not a growth strategy. Just like gov't roadwork positions didn't stimulate growth, they are short term positions. Second, franchise employment are usually low paying, minimum wage positions: "Caldeira says more access to financing means franchisees can hire more taxpayers." The great majority of these workers will pay minimal, if any, taxes under current IRS regulations.
In my article from yesterday, the IFA was seeking to lobby the Senate to promote an ammendment to increase franchise financing guarantees. The IFA's continued efforts in Washington will most likely increase: “This means we must escalate our advocacy efforts to ensure that our voices are heard even louder so that Congress takes action on the simple and common-sense steps we think will help to create jobs.”
“Our biggest challenge—and our biggest opportunity—is to educate our elected leaders so that they will see it. Our message is compelling, and it’s an urgent one in light of the economy here at home and around the world: Give us the policies that help franchise businesses open their doors, and we will do the rest.” QSRMagazine.com
". . .and we will do the rest"? Perhaps it is the clarity of this statement that has the banks on edge.