GREAT NEWS FROM WASHINGTON DC!

Twitter: RonaldFeldman

On September 2, 2009, the Small Business Administration announced a major revision to the Standard Operating Procedure ("SOP"), revising their prior guidance relative to the financing of goodwill in re-sale transactions. They effectively removed the previously enacted (March 1, 2009) hard "cap" on goodwill financing that was set at $250,000 or 50% of the loan amount, whichever was lower. This severely hampered the franchise resale market, hamstringing the ability for franchisees to sell their units to other franchisees or for franchisors to sell corporate units to new franchisees.

Highlights of the new guidance, announced yesterday and effective on October 1, 2009 provide for the following:

If the intangible amount is under $500,000, lenders may finance 100% of goodwill without restriction.

If the intangible amount is greater than $500,000, lenders may finance 100% of goodwill, provided that the purchaser injects 25% or more into the transaction as equity. This may include standby seller financing (2 year minimum) as a portion of the equity injection.

Additionally, language forcing lenders to explore seller financing on all transactions was stricken from the document. Lenders now have the flexibility to determine if seller financing is appropriate on a transaction by transaction basis.

If you have plenty of time to read the entire 388 page document, it can be found at: http://cts.vresp.com/c/?SiegelFinancialGroup/15694b8fab/bd75198ec7/3562844d7d

This welcome change demonstrates the important government relations role the International Franchise Association ("IFA") plays in Washington D.C. The Government Relations Team of the IFA acted immediately when we alerted them that the SBA had enacted the goodwill financing restrictions last March, asking that the change immediately be rescinded. The IFA's Government Relations Team (including David French and Jason Straczewski, organized meetings on Capitol Hill and testimony before the House Small Business Committee, together with email and letter writing campaigns to our legislators. The entire Government Relations team acted as leaders for our industry, and should be commended.

However, this issue is only one of many facing us in Washington. Once again, I would like to personally encourage each and every one of you to register and attend the IFA Public Affairs Conference (formerly Franchise Appreciation Day) on September 14-15 in Washington DC.
Click on this link to get more information: http://cts.vresp.com/c/?SiegelFinancialGroup/15694b8fab/bd75198ec7/eaaa982279

This event brings each and every one of us face to face with our lawmakers so we can voice our concerns over issues that affect our livelihood. If we do not act, we will not get help. The record of this administration speaks for itself, as it allocated all of 1/8000th of the stimulus funds to help small business! Our agenda does not end with capital access, the new Health Care Agenda and Card Check can significantly impact all of us, and the future tax implications of all of this spending will reach into our pockets for years to come.

Please make arrangements to make sure that your company is represented. Better yet, come yourself! There is no registration fee for this event, and you will be doing your civic duty as an American! The entire Siegel team will be represented there, and we look forward to seeing you in Washington!

About Siegel Financial Group
Known nationally as an expert on issues of finance in the franchising and intermediary market for transactions up to $10 Million, the Siegel Financial Group of companies continues to provide cutting edge counsel to the industries that it services. Today we serve some of the biggest and most respected brands in franchising, setting the bar for customer service and “getting deals done”.For additional information about Siegel Financial Group or an update on how current economic conditions are affecting franchising, contact Ron Feldman at 610-668-9780.