From: The Honorable Keith Ellison
Bill: H.R. 3559
Become a Cosponsor of the SBA Franchise Loan Transparency Act
Cosponsors: Reps. Connolly, Conyers, Frankel, Grijalva, Huffman, Larson, McCollum, Norton and Bobby Scott
Supported by the Coalition of Franchisee Associations (CFA); Meineke Dealers Association (MDA); and the Service Station Franchise Association, Inc.(SSFA)
Would-be entrepreneurs who buy franchises with government-guaranteed loans should receive accurate financial data from the franchise corporation.
The Small Business Administration Franchise Loan Transparency Act of 2015, (H.R. 3559), requires franchise corporations disclose average first year of business revenues of franchisees over the previous 5 years. The bill also requires franchisors provide the
number of first-year business failures for the previous 5 years, and average unit revenues for the top 25%, middle 50%, and bottom 25% of all franchised units.
One of the benefits of franchising is the presence of accurate revenue, profit and loss and other financial data that can guide an entrepreneur into making a decision to invest in a business. However, even when franchisees receive SBA-guaranteed loans, they
do not always receive such financial data or the ones they receive may be inaccurate.
A number of recent studies including a
2013 Government Accountability Office (GAO) study and an SBA Office of Inspector General
2011 audit, found that when franchisors did include first-year revenue projects, “they were significantly higher than historical actuals” and in some cases “the lenders approved the loans based on inflated gross revenue projections.”
This bill would prevent
intentionally deceptive behavior, which leads to hardship for entrepreneurs, franchise failures and
SBA defaults. I encourage you to listen to
some of the stories from franchisees who allege they were mistreated by the franchise corporation.
Transparency will ensure a fair and solid start for small business owners. Having this information available when applying for an SBA loan will enable franchisees to receive a loan and payment schedule that they can adequately service decreasing the likelihood
that they will default thus causing taxpayers to compensate the lender.
For more information, contact Carol Wayman,
email@example.com or 202.225.4755 in Mr. Ellison’s office. I welcome your support.
Member of Congress