Defaults on SBA 7a loans for franchises have soared by 52% in the latest fiscal year according to The Wall Street Journal (subscription required). In dollar terms, the loan losses totaled $93.3 million, a 167% increase over the prior year.Here's the list where at least 11 franchisees defaulted on SBA 7a loans during fiscal year 2008 in order of the number of defaulted loans: Quiznos, Cold Stone Creamery, Subway, Curves for Women, Planet Beach, Aamco Transmissions, CiCi's Pizza, Carvel Ice Cream, Domino's Pizza, Dream Dinners, Taco Del Mar. Quiznos franchisees had the greatest number of loan defaults at 108 bad loans.
As a percentage of the total number of SBA 7a loans, these franchisees were not the worst offenders. The worst offenders based upon percentage of SBA guaranteed loans to franchisees to default over the last eight fiscal years included: Mr. Goodcents Subs & Pastas (55%), Philly Connection Sandwiches (51%), Cottman Transmission (49%), All Tune & Lube (47%), Cornwell Quality Tools (42%), Carvel (41%) and Blimpie (41%).
I'm sure someone at these franchisors has a really good reason why their franchisees may not be good at repaying their debts. The bottom line is that SBA lenders will be thinking twice before taking one of these deals to their investment committees.
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Tags : credit crunch , SBA loans , 7a loans , franchise loans
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