Small Business, Big Risks
Three in ten Small Business Administration loans to California franchisees in recent years have failed, according to a new analysis by the Service Employees International Union. The study also finds that more than 40 percent of franchise systems that have been significant users of SBA loans in California in the most recent five-year period analyzed have failure rates above 20 percent.
This report follows up on SEIU’s analysis of national trends in SBA franchise lending, released in May 2015, which found a high and rising risk of loan failure for franchised businesses that borrow through the SBA’s 7(a) Loan Program, the agency’s largest loan program. This report analyzes records for 7,165 loans to franchisees in California over a 20-year period, 1991 to 2010, representing a subset of the more than 60,000 SBA franchisee loan records analyzed in the national report.