What is an SBA loan?
SBA loans are small-business loans offered by banks and online lenders and partly guaranteed by the government. It can help cover startup costs, working capital needs, expansions, real estate purchases and more.
How do SBA loans work?
You apply for an SBA loan through a bank or credit union. That lender then applies to the SBA for a loan guarantee, which means if you default on an SBA loan, the governments pays the lender the guaranteed amount. The SBA requires an unconditional personal guarantee from everyone with at least 20% ownership in a company. Both the government guarantee and the personal guarantee reduce the risk for lenders - making them more willing to work with small businesses. Once you've been approved for an SBA loan, your lender is responsible for closing the loan and disbursing the loan proceeds. Usually you would be repay the lender on a monthly basis.
SBA franchise loan options
Franchisees looking to get an SBA loan can fund their business with two types of SBA loan. SBA 7(a) or SBA CDC/504 loan.
SBA 7(a) loans
They are the most common type of SBA loan and can used for a wide variety of purposes that includes working capital, equipment or supplies purchases, and business expansions or renovations.
SBA CDC/504 loans
Can only be used for specific purposes, including equipment, land and real estate purchases. You can also use one of these loans to improve land, streets, utilities, parking lots and existing facilities. CDC/504 loans cannot be used for working capital, inventory purchases, refinancing or repaying debt.
Steps to get an SBA loan for your Flooring Liquidators franchise
1. Check your business's qualifications
Franchise businesses must meet an additional requirement to be eligible for SBA financing. Great news, Flooring Liquidators is listed in the SBA Franchise Directory and is eligible for funding.
2. Choose a lender
The right SBA lender for your franchise depends on a number of factors. You'll want to look for an SBA lender with an established history of issuing loans, streamlined application process and dedicated loan specialists.
You should utilize an existing relationship at a bank or credit union and discuss its SBA loan options. You can also use the SBA Lender Match tool where you will answer a few questions and receive an email with possible lender matches.
3. Gather your documents and submit your application
You'll be asked to provide the following for your SBA Loan Application:
- SBA loan application form
- A personal financial statement
- A statement of personal history
- Business financial statements, such as income statements, balance sheets and cash flow projections
- Income tax returns
- Detailed schedule of collateral
- Existing debt schedule
- Business certificates or licenses
- Loan application history
- Resumes for each business owner
- Business overview and history
- Business lease
- SBA unconditional personal guarantee from anyone with 20% or more ownership in the business
You'll need to provide your franchise agreement along with the SBA Form 2462 (Addendum to Franchise Agreement).
After you've submitted your application, funding can take anywhere from 30-90 days.
Visit Flooring Liquidators' franchise page to learn more about franchise opportunities.