Are you looking to start a new franchise or expand one you already own? Growing your business sets you up for an excellent future, but the startup costs can sometimes be substantial. This is where an SBA loan comes in. These loans can give you the funds to make your dreams come true.
An SBA Loan
SBA, or small business administration, loans offer low-interest rates, meaning you aren’t going into a mountain of overwhelming debt. These loans are explicitly targeted at small businesses, meaning you can use them to open a new franchise or expand on one you already own.
While the SBA does not give you the loan, it provides lenders peace of mind that the loan will be paid back, even if the customer cannot pay the debt. Because the SBA backs them, it is a lower risk for them, and they are more likely to give you a loan than they would be otherwise.
Types of SBA Loans
There are three SBA loan types.
SBA Standard 7(a) Loan
This type of loan is a popular choice and can be used for various purposes. You can use it for real estate, supplies, inventory, or refinancing debt you have already acquired. This loan can be an excellent option for new business owners or ones who have been in the franchise business for a while and are ready to grow their business.
SBA Express Loan
This is similar to the SBA Standard 7(a) loan, but it does vary in a few ways. First of all, the maximum loan amount is $500k, while SBA Standard 7(a) loans can be as much as ten times that. You can expect to pay slightly more interest on these loans too. However, the advantage these offer is that the approval decision is typically quicker, within a day or two. Keep in mind, however, that the process of obtaining the loan will likely be longer.
SBA CDC/504 Loan
This loan is explicitly meant for real estate and can be for as much as $5 million or upwards of $5.5 million, depending on the project. This may be used to construct new buildings, improve or expand current structures, or fix machinery.
These loans can all help your franchise expand. The one that works for you depends on your needs and credit situation. Take a look at each option to determine which one may be right for you.