Small Business: SBA franchise registry streamlines loan approval

Sam Jones is the Region VII SBA Administrator.

While visiting the area last year, I was pleased to learn that Aire-Master of America Inc. in Nixa, a high-growth company that Springfield's Chamber of Commerce has recognized, became listed on the U.S. Small Business Administration's online franchise registry.

The registry is an example of SBA helping small-business owners through cooperation between government and industry. Since 1993, the SBA has approved nearly 12,000 loans to franchisees in nearly 1,200 franchise systems and continues to approve more than 3,500 franchise loans each year.

The purpose of the franchise registry is to help expedite the process of purchasing a franchise for both the franchisor and the franchisee should the lender seek an SBA loan guarantee. Additionally, it helps businesses ready to franchise to promote their franchise agreements by giving prospective franchisees an online preview of their agreement.

Lending to franchise operations has special rules, since by law SBA can only lend to small businesses. SBA must verify that its borrowers are small businesses and will use their loan proceeds appropriately. SBA or one of its participating lenders has always reviewed relevant franchise documents whenever a franchisee seeks an SBA loan guarantee.

By law, SBA cannot approve a loan guarantee if a franchisor exerts so much control over the franchisee's daily operations and profits that it becomes the real owner of the business.

The franchise registry helps SBA and its participating lenders make consistent eligibility decisions, speed access to SBA financial assistance, streamline processing and recognize industry-specific factors during the loan review process.

The registry enables lenders and SBA local offices to verify a franchise system's lending eligibility through the Internet. This reduces red tape, time and costs for all concerned.

Since it's inception in 1996, the franchise registry has developed a proven track record of success for both franchisors and franchisees.

Richard L. Kolman, senior franchise counsel and senior director for Mail Boxes Etc. Inc., said, "I'm delighted to enthusiastically endorse the franchise registry. The application process was user-friendly and straightforward. The speedy turnaround time exceeded all expectations. This innovative solution has been greatly appreciated by our franchisees. This is an intelligent tool for expediting system growth, and we look forward to enjoying the return on this investment for many years to come."

Participation by a franchisor in the registry is voluntary. If a franchise is not listed on the system, it does not mean an SBA loan guarantee is not possible; nor can the registry be construed as either an endorsement by SBA or an indication of the franchise system's quality or profitability.

Any franchise agreement will still be reviewed individually by SBA or its lenders as quickly as possible; but SBA will be unable to expedite the process at a time when loan guarantees for franchise operations are at an all-time high.

Take a look at the SBA franchise registry at www.franchiseregistry.com or inquire at the Springfield SBA Office 417-890-8501 about how to register your company's franchise agreement to increase your market or, as a buyer who may borrow start-up funds, to find a franchisor whose agreement has been pre-approved by SBA. It could save time and money.