Franchises, that intersection between big business and small business, are feeling the credit reins tightening. Two major franchisee financiers are pulling back, according to William Blair & Co. analysts, who said in a research note that the moves were "disconcerting."
Tom Palazzo, vice president of franchise development for Foster's Grille, a Northern Virginia company planning to open "fast casual" burger restaurants in the Baltimore area, said his firm's lender recently upped its cash requirements for franchisees from 20 percent to 30 percent.
But Palazzo feels fortunate that his company has a relationship with that lender, which is still making loans guaranteed by the SBA. "Credit has tightened up tremendously," he said.
Kristi Mailloux, president of cleaning service company Molly Maid, which is looking to expand its Maryland presence from seven franchises to 17, said loans are taking six to 10 weeks to get approved rather than the usual four to five weeks.
And new franchisees have fewer options now because the home equity lines of credit they could tap before are much more difficult to get. But the two candidates Molly Maid is considering in the Baltimore area have not mentioned financing concerns, she said.
"I believe it's something that will work itself out with, hopefully, help from the government over the next couple of months," Mailloux said.
As firms look for alternatives, more are calling Baltimore County's Department of Economic Development to inquire about its small-business loan partnership program, a combination of bank and county financing. More banks are calling, too, looking to spread their risk by getting the county involved.
"We usually get maybe three calls a month," said Stan Jacobs, chief financial officer of the economic development department. "In the last two weeks, I've probably had 10 calls."
Peisach, the loan broker, said his clients are rushing to get their loans closed "before something bad happens." In this topsy-turvy environment, he is more nervous about loans with big banks than small ones.
"We have not had any reason to change our lending policy," said Mary Ann Scully, president and chief executive of Howard Bank in Ellicott City, a small institution that focuses on small and midsize businesses. Like some of its customers, "we're still in a growth mode."
