Small business term loans. Term loans are typically for a set dollar amount (e.g., $250,000) and are used for business operations, capital expenditures, or expansion. Interest is paid monthly and the principal is usually repayable within 6 months to 3 years (which can be amortized over the term of the loan or have a balloon payment at the end). Term loans can be secured or unsecured, and the interest can be variable or fixed. They are good for small businesses that need capital for growth or for large, onetime expenditures.
We are often asked by franchise owners, “What do I need to qualify for franchise financing with Balboa Capital?” Well, they couldn’t be more happier with the answer to that question. If your franchise has been operating for at least one year, and it generates $300,000 or more in annual revenue, the chances are pretty good that you will qualify. We will just need to review your credit to make a decision.
What You Need to Finance – Depending on what franchise you’re planning to buy, you may need to buy equipment, hire employees, purchase commercial real estate, and more. Craig Morgan, a managing attorney at Providence Law, says that some franchises, such as a car dealership, requires the purchase of commercial real estate. The things that you need to get started will affect what type of financing option is best for you.
Negotiate the startup and operating costs: When you buy a franchise, there is a pretty long list of things that you need to buy before you can open the doors to customers. The cost for such items will be noted in the Franchise Disclosure Document. If you negotiate, the franchisor may be willing to absorb the cost of some of these items for you, like discounting your franchise fee.
The International Franchise Association maintains a directory of franchises that are approved by the SBA to receive SBA funding. Each franchisor in the directory is required to submit a Franchise Disclosure Document (FDD) with information about its company to the SBA for approval. Working with a company that is pre-approved by the SBA will expenditure the process of obtaining an SBA loan for your franchise.
Remember that a business is franchised for two reasons: to expand the business and to raise capital. So if you have a reasonably good credit record and pass all the financial requirements, most franchisors will bend over backwards to get you on the team. The help that franchisors provide to help you get financing usually includes assistance with business plans and introductions to lending sources. In many cases, franchisors serve as guarantors of loans you take out.
If you want to separate your personal liability from your company's liability, you may want to consider forming one of several types of corporations. This makes a business a separate entity apart from its owners, and therefore, corporations can own property, assume liability, pay taxes, enter into contracts, sue and be sued like any other individual. One of the most common structures for small businesses, however, is the limited liability corporation (LLC). This hybrid structure has the legal protections of a corporation while allowing for the tax benefits of a partnership.
Despite these indicators, financing remains a problem for potential franchise owners.  According to Entrepreneur magazine (January 2013), there’s still an 18 percent lending shortfall in the franchising industry. In a bid to boost franchise ownership, many franchisors are taking matters into their own hands and offering financing programs of their own. Meineke, The UPS Store, Gold’s Gym, Masasge Envy and Instant Imprints are just a few examples of franchisors now offering financing to qualifying first-time and multi-store franchise owners.
While they might not be as plentiful, businesses in rural areas are just as important as businesses in urban areas. The USDA’s Rural Development loan program is dedicated to helping businesses in rural areas get started and grow. Like the SBA, this loan program does not lend directly but rather guarantees loans, which allows entrepreneurs access to a larger line of credit than their personal credit would allow so they can successfully build their business.
If you are using the web to help you acquire a loan, beware of "Free" services, sites not certified by TRUSTe or sites with poor Better Business Bureau ratings. These sites may just want your contact information which they then sell to brokers and lenders. It is not a very efficient way for you to get financing and may lead to wasted time, money and calls from unsavory and unqualified sources. Also, make sure there are no hidden fees that either you or the lender will need to make - or guarantees that you will receive a loan.
If you prefer that we do not share this information, and would not like to receive targeted advertising as described above, please see our Opt Out page. Note that if you opt out, you will still receive advertising. Also, if you opt out and later delete your cookies, use a different browser, or buy a new computer, you will need to renew your opt out choice. If you would like to stop receiving Credit Based Offers as part of your enrollment in certain CIC products and services, please call Customer Care at 1-866-617-1894
×