The US Small Business Administration offers loans that can help you start a franchise. The SBA 7(a) loan or the SBA 504 loan could be the right option for you.
Take a look at our outline of these loans to learn more:
SBA 7(a) Loans
These business loans work well for many different aspects of a business franchise. This flexibility is a big part of the popularity of SBA franchise 7(a) loans. In fact, it’s easier to list what you can’t use this loan for: you’re not allowed to pay for ongoing franchise fees or royalties to your franchisor with a 7(a) loan. You can use the SBA 7(a) for nearly everything else–as working capital, for purchasing inventory or components, for buying business equipment for your franchise, and much more.
The loan limit is $5 million, repayable over 10 – 25 years. Interest rates vary by lender, up to an SBA-set maximum. Qualifications include a good credit score and 2+ years in business (typically), plus strong business financial documents.
SBA CDC/504 Loans
These SBA franchise loans work well for financing fixed assets, such as specialized franchise equipment. SBA 504 can also be used for purchasing (or renovating) real estate where you will locate your franchise.
The maximum loan amount is $20 million, repayable over 10 – 25 years. You are required to make a downpayment, your lender funds part of the loan, and a company called a CDC (Certified Development Company) funds the rest. Qualifications are similar to the 7(a) loan.
Is an SBA Franchise Loan Right for You?
Both of these SBA franchise loans have higher qualifications and are slower to disperse funds than some other funding options, however, SBA loan rates are usually among the lowest.
Learn about all your business funding options, including SBA franchise loans, from the experts at Green Leaf Capital. Contact us today.