Are you an aspiring franchisee? If so, you may be thinking about the SBA franchise loans that are available to help get your business past the startup stage.
Purchasing and operating a franchise is a smart option and helps you find the middle ground between traditional employment and entrepreneurship. After all, buying into a franchise means that you can access the brand’s stability, business model, and resources. However, you also enjoy the benefits offered by small business ownership. However, getting the funds for this new venture is essential, which is where an SBA franchise loan can be helpful.
Getting to Know SBA Loans
SBA loans are considered some of the most coveted loan products available on the market today. This is thanks to their high capital amounts, which can reach into the millions, low-interest rates (often in the single digits), and longer terms. However, there is a lot of competition for these loans, which means you need to know how to give yourself and your business the best chance of being approved.
The Top SBA Franchise Loan Options to Consider
You have two basic options when it comes to SBA franchise loans. One is an SBA 7(a) loan, and the other is an SBA CDC/504 loan. Determining the type of loan that is right for your franchise is based on what you intend to use the money for.
The SBA 7(a) Loan
These loans usually make the most sense if you are opening and funding a new franchise. This is because it is possible to use the funds for virtually anything needed to get the business up and running.
The SBA CDC/504 Loan
While SBA 7(a) loans are much more flexible, the SBA CDC/504 loan is a better option for franchisees requiring a large amount of capital or long-term loans for purchasing, refinancing, or renovating specific fixed assets. Examples would be equipment or real estate.
Finding the Right Option for Your Business
As you begin exploring the SBA loan options for a new franchise venture, be sure to keep the two main options in mind. Chances are, one of these is going to suit your needs.
Just remember, the competition for these loans is high, and the requirements are stringent. If necessary, work with someone who can help you put your business’s “best foot forward,” which will help ensure you secure the capital needed to open, grow, or improve your franchise.