May
14
Franchise Loans Keep Blowing Up, and the Government Keeps Backing Them
ByNearly 20 percent get charged off by the SBA. Guess who pays
A Quiznos in San Diego.
Photograph: ZUMAPRESS.com
Buying a franchise is a risky business. Seventeen percent of franchise loans guaranteed by the U.S. Small Business Administration failed from 1991 to 2010, new data show. At the end of the period, almost 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 as much as 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…
Franchise Loans Keep Blowing Up, and the Government Keeps Backing Them
