SBA Alters Franchise Lending Rule
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SBA Alters Franchise Lending Rule

Earlier this week the Small Business Association temporarily revised its new lending rules for franchisees, prompting a sigh of relief from many franchisors and bankers who believed the new regulation could stifle franchise lending.

The updated rules say franchisors can use contracts already approved by the SBA in 2015 or 2016 to verify their franchisees’ availability for SBA loans. The new rules, which went into effect January 1, initially called for a standard SBA-issued contract to replace all others. The temporary changes remain in effect until February 1, 2018, and will be subject to review by the newly-appointed head of the SBA, Linda McMahon.

Earlier this week, former World Wrestling Entertainment CEO McMahon was overwhelmingly confirmed by the Senate Tuesday to serve as head of the Small Business Administration (SBA).

Approved by an 81-19 vote, McMahon, a 68-year-old Connecticut Republican, received more Democratic support than Trump’s other cabinet nominees. McMahon, along with her husband, built the WWE from a startup operation to a global enterprise. She stepped away in 2009 in pursuit of a political career, eventually losing U.S. Senate campaigns in 2010 and 2012.

“Like all small business owners, I know what it’s like to take a risk on an idea, manage cash flow, navigate regulations and tax laws, and create jobs…I have worked to help more people have the opportunity to pursue those goals,” said McMahon in testimony on January 24 before the Senate Committee on Small Business and Entrepreneurship.

“I will work to revitalize a spirit of entrepreneurship in America. Small businesses want to feel they can take a risk on an expansion or a new hire without fearing onerous new regulations or unexpected taxes, fees and fines that will make such growth unaffordable. We want to renew optimism in our economy,” McMahon added.

McMahon will oversee the agency’s 2,000-plus employees in helping small business owners and entrepreneurs secure financing, technical assistance and training, and federal contracts.

While the SBA has long been supportive of franchise systems, guaranteeing a significant portion of the loans made to franchisees, SBA loans are still restricted to bank lenders. Alternative lenders look to the new SBA leadership to approve more loan products in the future.