Lending to Franchises Reaches the Highest Level Since the Recession

Banks are expected to make $23.9 billion available to franchise businesses this year, according to a new report by the International Franchise Association.

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By Catherine Clifford

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Banks are coming back to the table to work with franchise businesses, but not fast enough, according to a new report released today by the Washington, D.C.-based International Franchise Association, a franchise-industry advocacy organization.

Banks are expected to make $23.9 billion available to franchise businesses in 2013, the report says, the highest level since 2009. The loans are projected to support 59,300 franchise businesses.

Of the projected capital, the report predicts that $5.6 billion in loans will come from the Small Business Administration's loan programs, which guarantee as much as 80 percent of the loan principal for a bank. Another $18.3 billion will come in the form of conventional bank loans.

Related: The 10 Fastest-Growing Industries for Small Business

Access to capital for franchise businesses impacts the overall health of the U.S. economy. According to the report, new and existing franchise units are expected to employ nearly 800,000 people and produce $106 billion in sales in 2013.

While it's welcome news that banks plan to make more loans to franchises, current and potential franchise owners are expected to need $26.5 billion in capital this year to fund current business operations or launch new franchise units, leaving a shortfall of $2.6 billion, the report says.

If the franchise industry had access to all the capital it seeks, the report estimates another 6,400 franchise businesses would be launched and another 85,900 jobs would be created or protected from layoffs in the U.S. in 2013.

Related: Franchise Forecast Continues Strong for 2013

The report, the Small Business Lending Matrix and Analysis, was prepared for the IFA by FRANdata, a franchise-industry market research firm, using data from the SBA, other government sources and state franchise examiners.

Have you tried to get a loan to open a franchise business? If so, what was your experience? Leave a note below and let us know.

Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

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