Is Getting an SBA Loan for You?

Going through the U.S. Small Business Administration’s loan process can be a long, mind-numbing process of paperwork. Fortunately, there are ways to trim down the time — particularly for would-be franchise owners.
On the plus side, an SBA-backed loan could be an attractive option for young businesses and startups that don’t have a sustained history of financial performance, said Ron Box in the Journal of Accountancy. For a business needing to restructure debt, such a loan could offer a longer term — and therefore a lower monthly cost — over traditional bank loans.
But on the downside, an SBA loan requires more information than its commercial bank alternative, Box wrote.
The SBA process can also be time-consuming, California Bank & Trust Vice President Rachel Zippwald told the Journal of Accountancy. That bank also is an SBA lender. For planning purposes, applicants can request a time estimate from the SBA for consideration of the loan.
To cut down on that time spent maneuvering through paperwork, the SBA has pre-approved certain franchise opportunities and has accepted their business agreements. So when a hopeful franchisee wants to get an SBA-backed loan for a franchise on the list, the process becomes streamlined and the loan review less complex, according to the SBA’s Small Business Cents blog. The loan review focuses more on specific aspects of that franchisee’s plan rather than the whole business organization.
The Franchise Registry keeps the searchable database of SBA-approved franchises in partnership with the SBA.
Just because a franchise opportunity is on that registry, doesn’t mean a would-be franchisee gets automatic approval; nor does it mean that the franchise is endorsed over another not on the list. A franchisor may have simply opted out of the registry.
During the SBA loan process, lenders will want to see information including:
• Business profile: Don’t assume a lender will know what the industry or business is like. This is where the history of the business, the service or product offered, future plans, customers, competitors and other information is given.
• Management experience: The info should include the resumes of each owner and key manager, according to the SBA.
• Loan repayment: This should tell how the loan will be repaid.
• Financial statements: Both personal and business statements as well as the past three years of income tax returns, among other items need to be submitted.
• Proposed business and projections: These should include plans for future operations at least a year out.
Wells Fargo’s vice president of SBA lending, Thomas Burke, told the Philadelphia Business Journal that someone looking for an SBA-backed loan should enlist the help of an accountant or business consultant to advise on how best to navigate the SBA loan process and be prepared with the paperwork.
The SBA-backed loans do offer an avenue for funding that may not be available elsewhere, so with preparation and research, the loan process can be smoother.
Lee Thomas, Franchise Paths to Success
“Placing people in the RIGHT franchise for their SUCCESS”
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