This ad will close in
Question added to topic FranchisesDecember 3, 2009

Does buying an existing franchise qualify for an SBA loan?

I want to buy a franchise from an existing owner. Can I use an SBA loan to finance the sale and to finance working capital?
Yes--buying an existing franchise business is a transaction that falls within the acceptable parameters of SBA loans, but that's not saying you will be able to get one.

SBA loans can cover financing for a business purchase and they can also cover the financing of working capital reserves. You'll still have to meet all of the qualification standards--both personal and business--before you can get a loan and you'll have to find a bank willing to lend. Though the latter has not been a problem until the past year or so, it is definitely an issue in today's very tight small business credit market.

The best approach is to contact the franchisor first to determine their experience with SBA loans and whether they are registered for expedited service with the SBA.

Second, contact your local bank(s) to determine if they are processing SBA loans.

Finally, find out if the seller is willing to carry paper for part or all of the purchase. Even if the interest rate is a bit higher, this approach may end up being easier and cheaper than going through the hassles and fees involved with an SBA loan.

Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.

0 Comments. Post Yours.

About ASK ENTREPRENEUR

Ask Entrepreneur is a question-and-answer forum for and by the Entrepreneur.com community. Send in your burning business question, or comment on someone else's now. Have a Question? Ask Now

Topics (over 1000+ answers)

Don’t see a topic? Suggest One

Ask Entrepreneur Q&A Hangouts

Google + Hangout With Shark Tank
Google + Hangout With Jason Falls
Google + Hangout With Angela Jia Kim
Google + Hangout With Grant Cardone