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Franchise Q & A: Does The SBA Loan Money For Franchises?

sba.gov website

The answer: Yes…the SBA does assist with franchise loans.

The 7 (a ) Loan Program is the most common type of SBA loan. As a matter of fact, some of the best franchise loans around are SBA Loans…lots of them are 7 (a ) Loans.

But, before I share some useful information on SBA Loans-you need to know one very important thing:

The SBA-The US Small Business Administration, does not loan money. Surprised?

What the SBA does is provide guarantees, sometimes up to 85% of the loan amount, that commercial banks…including maybe even the bank right up the street from you, approve.

Tip: When you start looking around for a lender-make sure they are approved for SBA Loans. Then fill out a Loan Application.

If you’re purchasing a franchise, a 7 (a ) Loan may end up being the type of loan you apply for and receive.

Here are the things 7 (a ) SBA Loans can be used for:

  • To provide long-term working capital to use to pay operational expenses, accounts payable and/or to purchase inventory
  • Short-term working capital needs, including seasonal financing, contract performance, construction financing and exporting
  • Revolving funds based on the value of existing inventory and receivables, under special conditions
  • To purchase equipment, machinery, furniture, fixtures, supplies or materials
  • To purchase real estate, including land and buildings
  • To construct a new building or renovate an existing building
  • To establish a new business or assist in the acquisition, operation or expansion of an existing business
  • To refinance existing business debt, under certain conditions

 

SBA Preferred Lenders

Some banks are SBA Preferred Lenders. Try to get with one of those if possible.

Information about Preferred Lenders:

The Preferred Lenders Program (PLP) is part of SBA’s effort to streamline the procedures necessary to provide financial assistance to the small business community. Under this program, SBA delegates the final credit decision and most servicing and liquidation authority and responsibility to carefully selected PLP lenders. The SBA, however, will continue to check loan eligibility criteria.

To be considered, lenders must have a good track record with the SBA, and must have demonstrated a proficiency in processing and servicing SBA-guaranteed loans.

 

SBA Loan Video

The SBA produced a short video that explains the 7 (a ) Loan program in an easy to follow way. Enjoy the video!

 
 

 
Do you have any questions about SBA Loans?
 
 






About The Franchise King®

My name is Joel Libava, and I'm the author of Become a Franchise Owner! In addition, I'm a franchise ownership advisor. I teach people the best way to choose, research, and buy franchises.