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Can You Get an SBA Express Loan for a Franchise?

Are SBA Express loans available for franchises? In many cases, the answer is yes. Hundreds of franchises are eligible for SBA financing, but they must be approved by the SBA first.

Check the SBA Franchise Directory to See if Your Franchise is Eligible for an SBA Express Loan

The fastest and easiest way to see if your franchise is eligible for an SBA loan is to check the SBA Franchise Directory. This directory, provided by the Small Business Administration, lists the name of every franchise that is currently approved for SBA funding in the United States. To qualify, the management of a franchise must submit a Franchise Disclosure Document (FDD) to the SBA, after which they will determine whether it meets the SBA’s requirements.

In order to be eligible, franchisors must not exercise excessive, direct control over their franchisees, and must not take a significant share of their profits. In addition, to be eligible, a franchise typically must not engage in any businesses that are prohibited by SBA regulations, such as gambling, religious education, lending, or any illegal activities.

Should You Fund Your Franchise With an SBA Express Loan?

First, it’s important to note that borrowers usually cannot use SBA financing, such as the SBA Express loan, to pay their franchise fees. In general, a franchise/franchisee must already be approved by the franchisor (and have fully paid their fees) before securing SBA guaranteed funding.

If you meet the criteria, and can get approved, however, SBA Express loans can offer loan amounts of up to $350,000, and can be funded in as little as 30-45 days, making them an attractive loan option for many businesses.

Other SBA Financing Options for Franchises

Despite the many qualities of SBA Express loans, they may not be the best SBA loan option for every business. For example, if your franchise needs more than $350,000, it may want to look into an SBA 7(a) loan, which can provide up to $5 million in funds for eligible borrowers. And, if you already have a decent amount of working capital, and you want a loan to purchase commercial real estate for your franchise, the SBA 504 loan could be your ideal option. 504 loans have significantly lower interest rates than 7(a) or Express loans, and are offered in amounts of up to $5.5 million.

If you’re a franchisee working with a franchise on the SBA’s Franchise Directory, an SBA 7(a) loan, or even an SBA 504 loan can be an excellent choice. SBA 7(a) loans offer benefits including:

  • Loan amounts of up to $5 million

  • Long repayment terms; 7 years for working capital, 10 years for new equipment, and up to 25 years for real estate

  • Highly competitive interest rates

However, SBA 7(a) loans do take longer to fund than some other types of non-SBA loans, and, they may be more difficult to qualify for, especially for business owners who may not have a strong credit score. Non-SBA loans typically have far higher interest rates and less desirable terms when compared to SBA financing, but often have much lower credit requirements.