Bloomberg: ‘Franchise Loans Keep Blowing Up, and the Government Keeps Backing Them’

That’s the headline of a BloombergBusiness article about We Are Main Street’s study of Small Business Administration loans to franchised businesses.


“Buying a franchise is a risky business. Seventeen percent of franchise loans guaranteed by the U.S. Small Business Administration failed between 1991 and 2010, new data show. At the end of the period, nearly one in five franchise owners went splat.”


“The loans, made by private lenders, weren’t merely delinquent. Failed loans are those charged off by the SBA, which guarantees up to 85 percent of the value of working-capital loans through its 7(a) program. Even after liquidating collateral, which can include franchise owners’ homes, the government had to use taxpayer dollars to make the lenders whole.”

“Data provided to Bloomberg by the SBA show that working-capital loans to franchises haven’t performed as well as loans to non-franchise businesses.”

Full Report: “Risky Business: Franchisees’ High and Rising Risk of SBA Loan Failure” | Press Release