How To Decide If SBA Franchise Loans Are Right for Your Business

Many franchises are registered with the Small Business Administration’s franchise directory. That means that whether the franchise you’re interested in offers to finance directly, through third-party lenders or not at all, you can still qualify for the capital you need. With sufficient financing, you can give your new location a solid start in business and drive excellent cash flow.

What SBA Franchise Loans Are

SBA loans for franchises are designed to provide your financing for virtually any aspect of launching the new business. Whether you need assistance with the preliminary franchise fee, require money for real estate costs or a down payment, or have to cover other aspects of franchising out of pocket, SBA loans can provide the capital required. This is helpful because opening a new location can have many costs, both anticipated and unforeseen.

SBA loans for franchising are backed significantly by the government, which allows you to obtain incredible interest rates and long repayment terms from many lenders. This takes a lot of pressure off your business, especially during the first three to six months when you need to focus on building your customer base.

The SBA has strong ties to financial institutions throughout the United States, so you don’t have to worry about finding a lender close to you. It’s a good idea to make sure that the bank or lender you’re interested in working with has a lot of experience working with SBA loans for franchisees, however.

Ongoing SBA Franchise Loan Options

With SBA financing, you’re not limited to a loan at the opening of a new location. Plenty of franchisees apply for SBA loans later on in business as well. This additional capital is valuable for expansion projects, opening an additional location, purchasing company vehicles, creating a company website or investing in the business in another way. Short-term SBA financing and microloans can even help you deal with sudden financial emergencies from natural disasters or other unexpected circumstances.

Requirements for the SBA Loan Process

The requirements vary for SBA financing depending on the specific lender. However, this type of loan is generally easier to obtain for small business owners than traditional term loans. Having good credit, business experience and enough capital for a down payment are all pluses, but they’re not set-in-stone requirements. In fact, if you qualify with franchise owners to open a new location, there’s a pretty good chance you’ll qualify for SBA financing as well.

SBA loans do have certain usage restrictions — you have to state the purpose of the loan while applying — and take a while for approval. However, they’re powerful tools for building a franchise and well worth the time invested.

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