Franchise funding... Is help on the way?

Comments from Small Business Minister have roused market participants.

Last week, Bruce Bilson MP, Federal Minister for Small Business commented that "the availability of finance had not improved enough since Australia's recovery from the global financial crisis and opportunities for growth and employment were being lost".

Well it seems that participants in the franchising sector have picked up on his comments. Darryn McAuliffe, CEO of Frandata Australia, the franchising sector reporting and information service provider says "the Minister's comments are absolutely consistent with the experience in Australia's $130 billion franchise sector. Sound overall health continues to be evidenced in the sector and as an asset class can provide an improved risk profile for lenders. Unfortunately the major banks are effectively recognising less than five per cent of franchise systems under their current individual lending programmes and as a result the franchisees of the majority of franchise systems are experiencing frustration when making applications for finance".

Speaking from the International Franchise Association’s annual convention in the US he goes on to say “a collaborative approach between industry and government can substantially improve this situation. In the US almost fifty per cent of active franchise brands submit to an independent 'eligibility review' as a first step in accessing support under the government's Small Business Administration (SBA) Act. The SBA program is a government initiative to support small business and provides a partial guarantee to improve the lender's 'security' position for qualifying franchise loans".

We’ll have to wait and see, in these straightened times, if the government is willing to back up its words with financial support.