NEW YORK—Loans made to franchised businesses edged up on a year-over-year basis during March, according to the IFA/BoeFly Franchise Lending Index.
The index analyzes proprietary data from BoeFly’s marketplace and franchise loan data from the Small Business Administration. BoeFly is an online marketplace that connects borrowers and lenders.
SBA lending has been low overall but high in the hotel sector, said Mike Rozman, co-president and chief strategy officer of BoeFly. Just 9.6% of SBA loans by dollar amount were extended to franchised businesses. But in that 9.6%, franchised hotel properties received 47.3% of all hotel SBA loans, according to the franchise lending index.
“Within that industry, there’s been a meaningful amount of SBA exposure,” Rozman said of hotels.
Year over year, lending to franchise businesses overall grew by 3.18% as of March 2012, according to the most recent data available. Month to month, however, franchise lending edged down by 0.49%.
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Rozman said financing appears to be loosening somewhat.
“We do see an improvement in the credit market,” Rozman said. “Lenders are gaining an appetite for more deals.”
Debt providers look favorably on franchised hotel properties, Rozman said. Lenders also are looking for solid properties to finance, he said. They are taking long looks at operating data, including occupancy, financials, etc.
“It’s easiest for lenders to get behind a profitable unit that’s showing growth,” Rozman said.
In a tight credit market, he said it’s important for hotel owners to be diligent about chasing funding. “Cast a wide net,” he said. “The results can be meaningful.”
Roller coaster ride
Even though the credit markets showed some give during March, Rozman expects the overall environment to be an up-and-down one at best during the course of the next 12 months.
For instance, even though franchise lending grew year over year, Rozman pointed out that in the time in between there were as many months showing expansion as retraction.
“My best guess is we’ll continue to see turmoil in this area,” Rozman said.
He added that he expects the credit markets to gain strength over the longer term, but there will be plenty of near-term volatility.
“I don’t think we will see many meaningful spikes” in the near term, he said.