Buying a franchise can be a great way to start your own business. If you are looking for financing, the Small Business Administration (SBA) may be able to help. An SBA loan can provide you with the funds to start or expand a franchise, but it is important to understand the requirements and qualifications for such a loan.

Can You Get an SBA Loan for a Franchise?

In many cases, the answer is yes. Hundreds of franchises are eligible for SBA financing, but they must be approved by the SBA first. To qualify for an SBA loan, lenders typically require at least two years in business, strong annual revenue and a good credit score (which must be above 680). The SBA’s loans require that one job must be created or retained for every $75,000 borrowed, too.

How to Apply for an SBA Loan as a Franchise

If an applicant’s brand meets the Federal Trade Commission (FTC) definition of a franchise, it must be in the Directory in order to obtain SBA financing. We recommend engaging a professional business broker to help you identify which SBA franchises are eligible for financing.

When applying for an SBA loan, you will need to provide a detailed business plan, financial documents, and a personal credit report. Additionally, you must be able to demonstrate that you have the necessary qualifications, including experience in the industry, to successfully manage the franchise.

Conclusion

You can use an SBA loan to open a franchise, however, you must meet certain requirements to receive the funding. Before you decide if one of these options is right for you, make sure you know the basics of franchising and buying an existing business. For more information on SBA loans and business brokers, visit Atlantabusinesses.com, a great resource for answers to all your questions about selling a business and about business brokers.

Is it possible to obtain a loan to finance the purchase of a franchise?

Franchisees can apply for a commercial loan from a bank of their preference. Acquiring the loan usually necessitates a good credit score and a comprehensive business plan. As the federal government endorses a portion of SBA loans, they typically come with more advantageous interest rates and payment conditions than those of commercial banks loans.

Can franchise owners obtain SBA financing?

SBA 7(a) loans can provide business owners up to $5 million to purchase real estate, fixed assets, working capital, and refinance existing debts when starting a franchise. This is an ideal loan for those who are looking to cover the initial costs of their business venture.

What is the difficulty level of obtaining a franchise loan?

You may need to have a great credit score, a solid financial background, and have been in the business for a few years to be approved for a franchise loan from a bank or credit union. Additionally, you may require collateral to back up the loan.

What does it signify when a franchise is endorsed by the Small Business Administration?

Franchises that have been approved by the SBA have gone through a rigorous process that allows them to more easily access loans from the SBA in the future. This does not completely eliminate the need for the franchisee to go through the SBA loan process, but it does make it simpler.