SBA franchise loans

1. Find out if your franchise is eligible for SBA financing

To find out if your franchise is eligible for SBA financing, you’ll need to review the SBA Franchise Directory. The SBA will only finance your franchise if it is under their approved list of franchises and other brands. 

If you do not find your franchise in the directory, you can submit a franchise or brand to the SBA Franchise Team if you are interested in getting your franchise in the SBA Franchise Directory. 

2. Determine if you meet the SBA eligibility requirements

Because SBA loans are highly sought after, the most important step to applying for an SBA loan is to ensure you meet their business eligibility requirements. This includes credit score, business experience, and collateral. 

Requirements vary depending on the type of loan product you are interested in, but prospective borrowers should expect a credit score of around 680 to 700 to qualify and have relevant business management experience or transferable skills to run a franchise. While you may not necessarily need franchise experience, SBA lenders are looking for borrowers who have the ability to generate a profitable business.

Lastly, you’ll most likely have a better chance of getting an SBA loan if you have some sort of asset with equity. 

3. Decide on your loan type

Unless you plan on purchasing real estate for your franchise, it’s recommended that for general-purpose funding, an SBA 7(a) loan will cover most of your franchising needs. As mentioned earlier, a 504/CDC loan can be used to finance commercial equipment, but in most cases, it’s designed for large real estate purchases or renovations. 

4. Choose a lender

To apply for an SBA loan, you’ll need to find an SBA-approved lender. It’s important to note that every lender has different requirements. Some lenders may focus more on the amount of collateral you offer, while others are more cash-flow-focused. Fortunately, you can apply to multiple lenders for an SBA 7(a) or 504 loans as long as you meet the SBA’s lending guidelines. 

Compare your options with Swoop

Whether you’re looking to refurbish, expand, or purchase an existing franchise, Swoop has dedicated franchise financing experts who can help you find financing for your business. Simply sign up and answer a few questions on Swoop to book an appointment with a franchise funding expert. 

5. Gather your documents and evidence

The most tedious and time-consuming part of the SBA application is filling out and gathering relevant documentation. These are the most important pieces of paperwork you’ll need for your SBA loan application: 

• An SBA loan application
• Business plan
• Balance sheet or profit & loss statements
• Statement of personal history 
• Business certificate 
• Business loan application history 
• Personal and income tax returns
• Resume
• Business certificate and licenses
• Business lease
• Signed franchise agreement

If you are planning on purchasing an existing business, you’ll have to provide additional documentation such as the previous tax returns of the purchased business, bill of sales, and asking price with the schedule of inventory, machinery and equipment, and furniture. 

6. Submit your loan application

Once you’ve submitted your application and documents, it will take one to two months for the lender to prepare a loan agreement. After the loan agreement is signed, funding will take roughly two weeks. You will most likely need to answer additional questions and requests from the lender during the closing period.