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As well as, franchises are most likely the least difficult businesses to get borrowed because they usually do not come with a lot of the start up risk (unknown risk) that banks and other business lenders usually shy away from. Since most dispenses come with strong brand names, proven profitability and cash flow track documents and tend to work in practically any location (globally), these business models have the propensity to fly through the loan underwriting process and go from application to money in no time smooth.
Actually the Small Organization Administration (SBA), in expectations of speeding up their funding process and finance more franchise loans, have formulated a “SBA-approve franchise” list – a set in place of franchises that the SBA has already vetted through their underwriting process.
According to Jim Deb, a former moderator for the SBA. gov website;
“SBA-approved franchises are go for online business offerings whose agreements have been accepted by the SBA. When it comes to securing an SBA-backed loan, those applying for an approved-franchise have it easier and quicker. Job seekers for SBA-approved franchises profit from a streamlined review process that expedites their loan application. Because the particular franchise is pre-approved, the money review is less complex and concentrates on specific aspects of that brand’s business plan. ”
Therefore, if the SBA likes franchises so much, what loan programs do they offer?
3 SBA Loan Programs Pertaining to Franchises
First things first. The SBA does not directly provide loans to business or franchise owners. Thus, you will still have to adopt your loan request to a SMALL BUSINESS ADMINISTRATION lending bank or financial institution. However, these originations also know that the SBA likes proven operation businesses and willing to review and process the application.
When seeking a SBA loan for your franchise you should concentrate your particular financing needs and match them to the SBA’s loan program as follows:
SBA 7(a) Mortgage Program: This is the SBA’s flagship program designed to fund almost all aspects of a business.
Based on the SBA, the 7(a) loan program can be used:
To supply long term working capital to use to pay operational expenditures, accounts payable and/or to get products on hand
Immediate working capital needs, including seasonal financing, contract performance, construction financing and conveying
Revolving funds based on the importance of existing inventory and receivables, under special conditions
To get equipment, machinery, furniture, fixtures, supplies or materials
To buy real estate, including land and buildings
To construct a fresh building or renovate a preexisting building
To establish a new business or assist in the acquisition, procedure or development associated with an existing business
To refinance business debt, under certain conditions