“You are our highest priority because we are confident that when you are succeeding, America succeeds.”
President Barack Obama was talking about small businesses when he made this statement during an October 21, 2009, event to announce his proposal to help small businesses.
International Franchise Association Washington, DC-area member franchise owners and IFA President and CEO Matthew Shay attended the event. Both said they couldn’t agree more that small businesses and franchise businesses are critical to the health of the economy. It is that belief that has motivated the IFA and our members this past year to get out the message that by promoting more lending and less government spending, policymakers can help franchise businesses provide better jobs that help the economy recover at a faster pace.
Through ads, testimony at multiple hearings, third-party research showing the impact of the credit crisis on the franchise industry, enhanced grass-roots efforts and good old-fashioned lobbying, the IFA has worked hard to make sure that Congress and the Administration heard this message. These messages were even part of my remarks to Congress when I testified in September about expiring tax incentives.
We have told Congress and members of the Administration, including representatives from the White House, Small Business Administration, Treasury and the Federal Reserve, that small businesses, and in particular franchise businesses, play a vital role in the financial health of our country’s economy. In the United States today, there are more than 900,000 franchise businesses, and these franchised operations have created millions of new jobs and trillions of dollars of economic activity over the past two decades.
However, the recent credit crisis has sharply curtailed the entry rate of new entrepreneurs into the franchising arena, deferring dreams and job creation. Many of these prospective franchisees are newly unemployed, but are a tremendous pool of highly skilled, motivated managers who can help get this economy growing again in a hurry. As a result, the SBA’s lending programs have become an increasingly important capital source, not only for franchise owners but for all small businesses.
As an important solution to the credit crisis, the IFA has strongly urged Congress to increase the SBA 7(a) loan limit from $2 million to $5 million.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. These franchised small businesses reach the SBA’s current loan limit of $2 million by the time they want to build their second or third store. By increasing the loan limit, at an annual growth rate of 5 percent, these businesses could create 450,000 to 650,000 new jobs (directly and indirectly) within the next 12 to 18 months.
The government has spent billions of dollars in stimulus and economic recovery efforts, with some resources targeted towards small businesses. But to fully leverage the power of small and franchise businesses to lead the economic recovery, more must be done, including increasing SBA loan sizes as the IFA has recommended and President Obama called for in October.
Making SBA loan programs work better for entrepreneurs seeking capital to open, acquire or expand a business will allow the economy to recover faster and provide the necessary bridge to a functioning commercial lending market once the recovery is complete. Most importantly, making these programs accessible to more small-business owners will create many thousands more jobs.
We applaud the Administration for listening to franchise business owners, for encouraging the flow of more credit and for keeping the American dream of small-business ownership alive and well. We now urge Congress to put these proposals into law.
Dina Dwyer-Owens is chairwoman of the International Franchise Association and chairwoman and CEO of The Dwyer Group.