Updated: Jan 7, 2020

It can be expensive to start a franchise, just like it can be to start a new business. I know because I own two. Where franchising differs is that the opportunity to secure funding is more ubiquitous than if you were securing funding for a start-up. As an earlier blog titled "To franchise or to start-up" pointed out, it is because the right franchise has an established track record with national recognition and relationships with lending institutions. In essence, it is easier to receive funding for your franchise because the risk is mitigated through a proven franchise model. While many people dream of owning their business, often that dream dies a dream. Don't let the lack of information deter you. One way to start that franchise and to realize your dream is with the initiatives of the Small Business Administration.

There’s a Government Agency for That?

In 1953 the Small Business Administration (SBA) was created to preserve free enterprise and strengthen the American economy. The overall goal was to create capitalism’s “circle of life” to equip the American people to start, build and grow businesses. Fast forward to present day and we have one of the greatest vehicles for small business entrepreneurs to realize their dreams; in the form of the SBA 7(a) Loan (although there are others). Here is six reasons why the SBA 7(a) Loan is powerful:

  • Federal Agency Backing: Remember, the SBA is a federal agency. They back-up as much as 85% of the value of a 7(a) loan.

  • Risk Mitigation: Loan applicant is required to personally guarantee at least 20% of the loan with personal assets. The SBA backs 85% or up to $3.75 million which decreases the lender’s risk should the borrower default or go out of business.

  • Inexpensive: Rates are very low and money is cheap with the 7(a) loan. This makes it a great way to secure your franchise funding requirements.

  • Clear Guidance: The approval process and requirements for both the lender and borrower are very straightforward. This makes the application and award process quicker and easier to achieve.

  • Lending Competition: The 7(a) can be issued to borrowers through banks, credit unions, and other specialized lenders. This makes them have to compete for your business. As we know, competition is always good for the consumer.

  • Generous Loan Repayment Schedule: Going with an SBA loan gives you more time to pay it back then going with a non-SBA loan. This is beneficial for many reasons including lower monthly payments and time to really leverage your business success.

Living the Dream!

There are many ways to secure the funding required to realize your entrepreneurial dreams. As we learned in this article, not all of them are created equal. As Wayne Gretzsky is famous for saying, “you miss 100% of the shots you don’t take”. When you are ready to take your shot at the American Dream, do so by starting off on the right foot. Give serious consideration to utilizing an SBA 7(a) loan in the event that you need extra funding. Of course, like loans, aspiring entrepreneurs are not created equal and each has their own financial requirements. If you are unsure of how to get started or what your funding requirements are contact a proven franchise consultant. The franchise consultant will be your best source for narrowing down the 4,500 existing franchises to a few that give you everything you want in a business, and nothing you don’t.


To learn more about the incredible franchises with low investment criteria, high margins and rapid break-evens schedule a call with Dan Lorenz.