FRANalyst Fridays: May the Franchise Be With You!

May 4th, 2018 by Melinda Modica

Small Businesses Explore Alternative Capital Sources in Light of Greater Demand for Growth

A recent report by PNC Bank on the Economic Outlook for Small Businesses[1] in the U.S. pointed out that nearly half of business SMB owners in the country felt optimistic about the overall economic trends which explains why more of them are seeking growth capital, and larger amounts at that. These SMBs, a lot of whom are franchise owners, are beginning to look beyond traditional lenders for growth capital. A variety of reasons can be contributing to this change in outlook like lack of time in business, lower credit scores, etc.

What small business owners need are straightforward financing solutions, and for several years now, continued growth and innovation in online lending has begun to transform the funding landscape for small business owners. While institutional lenders are picking up their role as the most active player in the market with a small business loan approval rating of close to 65%[2], these banks are primarily seen to be more inclined towards large, multi-billion corporate loans as their small business lending rating has remained largely flat in the last year. According to a recent report by fin tech research firm Medici, small business loan approval rates at alternative lenders were 55%-60%, while those at large banks were 23%-27%.[3] Alternative lenders seem to be gearing up to help more underserved borrowers, including women-, veteran- and minority-owned businesses, as they continue to invest into digitation and expediting loan requests. SBA guaranteed lending remains an important part of the overall franchise lending by specializing in small and startup borrowers.

[1] PNC Bank Economic Reports

[2] Biz2Credit Small Business Lending Index

[3] Medici Research

In the News

  • As Franchising Takes Off, These Businesses are Hottest [WSJ]
  • Small Business Owners Getting Much Needed Capital for Growth in 2018 [Forbes]
  • What do NFL Players Do When They Leave the Game? [Entrepreneur]
  • U.S. Small Businesses Anticipate Growth and Expansion in 2018 [PR Newswire]
  • Are You Getting A Good Deal On Your Financing? [QSR Web]
  • Small Business Owner Report, Spring 2018 [Coleman Report]