WASHINGTON — Even as the number of franchises has increased 65% over the past five years, this segment of the small business sector still remains an untapped market for credit unions and banks.
According to the International Franchise Association, the number of franchises has grown from nearly 1,500 in 2003 to 2,500 today. In the U.S. alone, the franchising sector produces $1.53 trillion and generates 18 million jobs, the IFA reported.
Most of the financing provided to franchises come mainly from non-bank lenders, according to IFA. Forty percent of franchisors offer loans to their franchisee but the funding is generally not enough to cover all financing to set up shop.
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Franchise holders tend to have solid credit histories–a characteristic attractive to lenders. Advertising campaigns, management training classes and the franchise's name recognition may make it easier for lenders to grant business loans to applicants with limited or no business experience, according to IFA.
Among franchises, fast food establishments hold the top spot followed by maintenance companies, retail and general services, the IFA reported. Between 2003 and 2006, the fastest growing sectors were window cleaning and handyman services.
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