Every business needs funding to get started. A common financing option for franchisees and small business owners is an SBA franchise loan. Learn what an SBA loan is, who is eligible, how to apply for one, and why partnering with a reputable franchise can make the whole process much easier.
What are SBA Loans?
SBA loans, backed by the U.S. Small Business Administration, are designed to help small business owners secure funding while reducing the risk for banks. The SBA supports this process by guaranteeing loans through its network of approved lending partners.
There are varying types of SBA loans, including:
- 7(a) loans: The SBA’s primary option for providing long-term financing.
- 504 loans: Long-term, fixed-rate loans provided by nonprofit, SBA Certified Development Companies.
- Microloans: Loans of $50,000 or less.
SBA loans are ideal options for small business owners and franchisees due to their lower interest rates, longer repayment terms, and reduced payment requirements compared to more traditional loans.
Without the burden of high monthly payments, SBA loans make it easier for businesses to launch or expand. Additionally, depending on the lender, some loans do come with ongoing support and guidance, helping entrepreneurs build long-term success with greater confidence.
SBA Loan Eligibility
Generally, there are five main criteria to qualify for an SBA loan:
- Run a for-profit business
- Be located within the U.S.
- Have strong credit
- Have already explored other financing options without success
- Fall within the SBA’s size guidelines
However, depending on the type of loan you’re looking to get, there may be additional requirements to consider. For example, those interested in applying for a 504 loan must have a net worth of less than $20 million and an average net income of less than $6.5 million in addition to the criteria listed above.
How to Find SBA-Approved Franchise Brands
Finding an SBA-approved franchise brand is easy. Simply go to the SBA’s franchise directory and download the list of qualified brands. This directory includes franchise brands that meet the SBA’s requirements for eligibility, making it much easier to secure financing.
Partnering with a brand listed on the franchise directory helps streamline and expedite the loan process. All brands listed on the directory have been pre-vetted by the SBA, which gives lenders peace of mind. Banks understand franchises offer established business blueprints, ongoing support, and streamlined processes to their franchise partners—all of which gives them confidence in your business.
If you’re considering a specific brand, you can always ask the franchisor directly if they are on the SBA list or have experience helping franchisees secure SBA funding.
How to Apply for an SBA Franchise Loan
Applying for an SBA franchise loan can be quite a process, but with solid preparation and a reliable franchisor, it doesn’t have to be a headache. Here’s what you can expect:
- Confirm brand is an SBA-approved franchise: Before anything else, confirm the brand you’re looking to partner with is listed on the SBA franchise directory.
- Gather financial documents: Be prepared to provide personal and business tax returns, a detailed business plan, financial projections, and personal financial statements.
- Find an SBA-approved lender: SBA loans are not directly paid out by the government. Instead, the SBA has a network of banks and lenders you can connect with. Using the SBA’s Lender Match program, you’ll meet various banks interested in supplying you with a loan.
- Apply for a loan: You’ll apply for your loan directly through the lender, not the SBA. Your matched lender should be able to walk you through the paperwork needed, including your franchise agreement and any documentation that proves your franchise is SBA-approved.
- Review, approval, and funding: Once you’ve submitted your application, it will be under review. Note, the review process can take several weeks.
How AdvantaClean Supports Franchise Financing
Many franchise brands, like AdvantaClean, offer support through the SBA application process, including help with documentation and guidance on curating your business plan. We also offer up to $32,000 in-house franchise financing to qualified candidates, to help make franchise ownership more accessible.
Whether you’re starting your research or actively exploring financing options, SBA loans can be a catalyst for long-term franchise success. To learn more about how AdvantaClean can help you get funding for your restoration business, contact us today. After we have received your inquiry, one of our franchise advisors will be in touch with you.
