As a business owner, countless lending options are available to help you get a loan to open or grow your own franchise. But finding the right loan option with the best interest rates can feel daunting if you’re not sure where to start.
One loan product that can help you start a franchise is an SBA franchise loan. This is a government-backed loan offered by the Small Business Administration to qualified entrepreneurs as a way to get capital to start and expand their businesses.
At Penn Street Mortgage, we’re more than just mortgage financing. Whether you’re looking for an SBA Loan, a franchise loan, or another type of real estate and lending product, we can help.
Since 2004, we’ve been providing financing and loan options to entrepreneurs and owners to meet small businesses’ needs, thanks to our due diligence process and our experienced and trusted team of brokers.
Keep reading to learn more about how Penn Street Mortgage can help you get SBA franchise financing!
Are you eligible to finance a franchise?
The first step in getting an SBA loan for purchasing a franchise is determining eligibility for your business. To do this, you must check the SBA Franchise Directory to see if your business meets the SBA’s affiliation rules and eligibility requirements.
SBA loans have strict eligibility requirements that you must meet to qualify for SBA financing 7 a loans. During the application process, you’ll have to show the following:
- You’re an established business that’s been operating for at least two years
- Your business has a strong annual revenue
- You and your business have a good credit score of at least 690
- Qualify as a small business
- Operate in an SBA-approved industr
While loan requirements can vary depending on the type of SBA loan you’re applying for, we can help you review SBA loan options and explain what product might be best for your financing needs.
How to apply for an SBA loan as a franchise owner
Before you submit your SBA loan application form, it can be helpful to understand the loan application process and what you can expect.
The first step in applying for SBA financing is to choose your loan type and lender.
If you’ve confirmed that your franchise is SBA eligible, the next step is finding a local lender that offers the loan type you want.
The Small Business Administration offers several business loans for entrepreneurs seeking working capital to start or expand a business.
For franchise owners or those looking to start a franchise business, there are a few SBA loan options that can get you started and provide you with the capital you need to establish your franchise.
SBA 7 a loans are one of the most common business loans that are offered by a third party lender like a bank or credit union. Franchise owners can use these for a wide variety of needs, including franchise fees, adding working capital or signing a business lease.
With funding amounts up to $5 million, competitive interest rates, and an option of short term loans or longer repayment terms, these business models are a popular option for business owners looking to start a franchise.
If you’re looking for a long term loan option, you can consider an SBA 504 loan to help secure real estate to start a franchise.
These are only available through Certified Development Companies in specific communities to help finance major fixed assets that promote business growth and job creation.
If you’ve determined what kind of financing will work best for you, your next step is finding a trusted local lender to help you secure financing.
Penn Street Mortgage is your local expert financing expert, as we’ve helped clients get business loans that fit their needs, giving them the power to expand and grow their businesses.
Once you’ve decided on the SBA lending product and found a reliable lender specializing in small business administration loans, your next step is gathering your business financial statements and submitting your application.
You’ll need to supply a handful of documents like your tax returns, SBA-specific forms, cash flow records, franchise agreement, net profit and loss statements, and your projected financial statements.
Depending on the lender you go with, you might be required to supply a plan that outlines more about your franchise system and future growth plans. This is to give the lender added confidence that you have a plan in place to use the loan responsibly and will be able to repay the loan over the payment term.
Small Business Administration Loans vs. Traditional bank loans
If you’re deciding between an SBA loan or a more traditional loan from a bank or online lender, it can be helpful to understand some of the key differences so you can find the best option for your franchise.
SBA loans offer longer repayment terms, like up to 25 years for real estate loans, and often have more competitive and lower interest rates. One of the key benefits is that they require less collateral than traditional lending options, which can be helpful for entrepreneurs that are just starting out and don’t have a lot of capital to put down for a downpayment.
Unlike SBA loans, traditional banks may offer more flexibility regarding how the funds can be used but require collateral to secure the loan. The loan amounts for traditional bank loans can vary depending on the lender, but there are many options to qualify for.
Unlike SBA loans, traditional banks may offer more flexibility regarding how the funds can be used but require collateral to secure the loan. The loan amounts for traditional bank loans can vary depending on the lender, but there are many options to qualify for.
Getting a small business loan to expand or start a franchise is an exciting business opportunity to generate new income and grow your net worth.
At Penn Street Mortgage, you can trust our financial experts to help you confidently navigate this major life decision. That’s why we believe in our Penn Street promise – to provide an honest, ethical and transparent approach to financing.
Contact us today to learn more about how we can help you take advantage of a great opportunity and find the loan terms to fit your small business needs.