The Small Business Administration
The SBA (Small Business Administration) is an organization that assists small businesses in obtaining funding whether that be by looking for government grants, disaster assistance, finding investors, and guaranteeing loans and surety bonds–SBA.Gov. The SBA guarantees loans so that banks are will lend capital to franchisees whom they may have originally deemed to be too risky of a borrower. The question, then, is how does a franchisee obtain a loan backed by the SBA?
First Things First
Before you go looking for a loan, it may be wise to look for startup capital in other places such as from friends & family, investors, and through crowdfunding. If after you have exhausted these wells of capital, begin looking for and comparing different small business loans. When talking to potential lenders, it is important to have a few things prepared:
- Business plan
- Expense report
- Financial projections for the next 5 years
Comparing small business loans before acquiring one is vital to find one that fits your business, your needs, and your ability to pay the loan off. When visiting banks and asking about loans, make sure to ask about such things as:
- Interest Rates
- Minimum Credit Score Requirements
- Cash Flow Requirements
- Prepayment Penalties
- Grace Periods
- If/When the lender can demand full repayment of the loan’s principle
SBA Loan
If you are still unable to acquire your necessary startup capital/if no bank will accept your request for a small business loan, turn to the SBA. Contact the SBA to start the process of finding a lender who will accept your loan request when backed by the SBA guarantee. In order to qualify for an SBA-guaranteed loan, your business must meet the following requirements:
- Must be a registered for-profit business
- Must be located and do business within the United States
- Business owner must invest his/her own time/money into the business
- Business cannot receive funds from any other financial lender
Once you have connected with your local SBA, they will help you get matched with a lender, offering benefits such as comparable rates and fees, continued support after you have received the loan, lower down payments, flexible overhead requirements, and no collateral needed for certain loans. Here are a few items you will need to prepare for your visit with the SBA:
- Business plan
- Amount of funds needed and planned usage of funds
- Credit history
- Collateral (depending on which loan)
- Industry Experience
- Financial Projections
ProjectionHub Can Help
Whatever loan you are pursuing, you will need financial projections. ProjectionHub can help with that! Our web application contains numerous projection templates for numerous different business models. We can help you generate up to five years of financial statements, and, if your business model is too specific for our web application or you are in need of more detailed/customized projections, we offer fully customized consulting services to meet your projection needs. Here are a couple of resources for you to use if you are in need of financial projections and would like to utilize the ProjectionHub services:
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