You can finance a franchise through two types of SBA loans: SBA 7(a) loans and SBA CDC/504 loans. SBA 7(a) loans offer up to $5 million of financing that can go toward a wide range of uses, like equipment, real estate and working capital. SBA CDC/504 loans, on the other hand, are meant specifically for commercial real estate purchases but can offer up to $20 million in financing. If you qualify, SBA loans are solid options for financing franchises. Just be sure to consult the SBA Franchise Directory to make sure your chosen franchise is SBA-approved before you apply. Alternative lender franchise loans If you can't qualify for an SBA loan to finance your franchise branch, look to alternative online lenders instead. Online lenders offer business financing to entrepreneurs who aren't traditionally qualified to access bank or SBA funding. If you have a personal credit score of less than 680, then alternative funding will likely be your best bet. Alternative business loans don't have terms as generous as SBA or bank loans—the funding amounts tend to be less, the repayment terms tend to be shorter, and the rates tend to be higher.
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