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How to Get an SBA Loan for a Franchise

November 25, 2019
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Many Americans love the idea of purchasing a franchise. Owning your own business is a great way to get your piece of the American Dream. One of the biggest stumbling blocks, however, is finding a way to finance that dream. There are many options available for getting a loan. Some franchises help with financing, some people can borrow from friends and family, some people use bank or a credit union. If you're one of the lucky ones, maybe you've got the money in savings. The latter is not an option for many people.

SBA Loans
The Small Business Administration (SBA) is one option that might be a viable solution to financing the dream of owning your own business and being your own boss. The SBA is an all-around great resource for businesses of all kinds. The purpose of the U.S. Small Business Administration is to help Americans start a business, build a business, and grow a business. The organization was created in 1953 as an independent agency of the federal government to "aid, counsel, assist, and protect the interests of small business concerns, to preserve free competitive enterprise, and to maintain and strengthen the overall economy of our nation." During that time, the SBA has helped start many thousands of businesses throughout the U.S. One of the services provided by the SBA is loans for purchasing or growing a business.


The SBA works with lenders to offer loans to small businesses. They don't directly lend money to small business owners, but instead sets guidelines for loans made by partnering lenders, community development organizations, and micro-lending institutions. By doing so, the SBA greatly reduces risk to lenders, which in turn makes it easier for small businesses, including franchises, to get a loan from the bank.

A lot of people are under the mistaken impression that the SBA makes loans directly to entrepreneurs for the sole purpose of starting a business. Not true. As stated above, the SBA makes a guarantee to banks or other lenders to pay back a portion of any loan the bank or lender makes for a business if the business fails and defaults on the loan. When you apply for an SBA loan, you are applying for a commercial loan through a bank or authorized SBA lender. Only banks and lenders structured according to SBA requirements are authorized for the SBA guarantee, and thus able to issue an SBA loan.

SBA Insurance Policy
An SBA loan presents great opportunities for start-ups, businesses that want to expand, first-time entrepreneurs trying to get into business, and for minority and special interest groups. There are several types of loans available through the SBA, with each loan designed for a specific purpose. These loans have their own criteria. This means it is important to examine the various options to find the one that fits your needs. Once you have identified the loan you need, visit an SBA approved lending institution and get the process started. Your lender will walk you through the process. There are numerous SBA approved lenders in the U.S. You can start with your lender to see if they are on the list or check out the 100 most active SBA lenders on the SBA website.


Remember, an SBA loan isn't a guarantee to the person borrowing the money. Many people assume the SBA automatically issues loans to anyone wanting to start a business. That is not the case at all. Getting an SBA loan can be time consuming. Your personal credit score has to be 660 or higher. For microloans (under $50,000), there might be smaller credit score requirements, but you will have to have collateral to cover the loan amount. SBA loans also require all of the same stipulations for the borrower as a traditional loan does.

Here's the good news, however. The SBA is more than happy to issue SBA loans for franchises. Actually, because a franchise is a recognized, already-established brand with a customer base already in place, getting an SBA loan to purchase a franchise is easier than getting one for a new, unproven business. In fact, many lenders won't even work with a business that is just starting up. Those banks might be more inclined to work with you if you are willing to go with an SBA loan, which guarantees as much as 90% of the loan. This is an attractive feature of the SBA loan to lenders.

SBA Loan Approved
Once you have applied for an SBA loan with your chosen lender, the lender checks to ensure it looks good to them and then they forward the application to the SBA. If the SBA approves the loan, your lender of choice issues the loan. The payments for your loan will be made to the lender, not directly to the SBA.

Regardless of how you plan to finance your franchise, the best place to start searching for a franchise is All USA Franchises. You can start your franchise search for franchises by industry or by investment, making it easy to narrow down your options to those that fit your specific criteria. All USA Franchises is completely FREE to browse or to list your franchises for sale, meaning there are never any fees collected from franchisors for premium views. This gives entrepreneurs, potential investors, and potential franchisees access to all of the available options, not just to those paying to be seen. At All USA Franchises, we are on a mission to be the largest directory of franchises for sale, bringing you all of the 3000 plus franchises available for purchase in the U.S. When you're looking for a franchise, let All USA Franchises be a part of your search.

All USA Franchises also maintains an extensive franchise blog full of franchise tips and articles to help you better understand the franchise industry. Get ideas for choosing the right franchise, find franchise information, and learn how to get financing for franchises. It's all in our blog, along with many other useful franchise information.

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