For many potential franchisees, the fees and costs that come with owning a franchise can turn them away from following through the process of purchasing a franchise. Luckily, there are funding options available for those who need help when it comes to financing their franchise.
One of the more popular sources of loans is the U.S. Small Business Administration. The government doesn’t directly provide these loans but works through its partners to help finance small businesses.
This blog will discuss the most common types of SBA loans, how you can become eligible for an SBA loan and the benefits of these loans.
Types of SBA Loans
Each type of SBA loan has different terms and is designed to help borrowers meet their specific needs. The SBA 7(a) allows borrowers to take up $5.5 million for their financing needs and is the most common type of SBA loan.
If you need help with purchasing equipment or real estate, you will want to consider the CDC/504 loan. For those looking for a smaller loan, the SBA also offers micro-loans of up to $50,000.
You must know what you plan to use the money for as some of the loans mentioned are more flexible than others. CDC/504 loans are meant strictly for fixed assets. Micro-loans also have some restrictions, but the SBA 7(a) can be used for nearly anything.
While the requirements for eligibility may differ somewhat depending on the type of loan you need, there are some general requirements that everyone will need to meet.
For starters, your business must be in the United States. It also must be a for-profit business in an eligible industry, and you must prove that you have a genuine need for the loan. A good credit score and a history of investing in your business may also be required by lenders.
Benefits of an SBA Loan
A big reason for SBA loans’ popularity is the amount of money that can be loaned out. You could take a loan of up to $5.5 million depending on what your business needs.
Of course, if you are going to take a loan, then will need to repay the money. When it comes to SBA loans, you will benefit from having a longer timeframe in which you must repay the loan. You also have access to resources to help support your investment, such as seminars, courses and networking events through the SBA.
If you are ready to leap into the world of franchising, get in touch today!