When you enter the franchising world, a name that you will definitely hear again and again is SBA or Small Business Administration. You will also come to know about the various loans it provides. For starters, SBA is an independent agency of the federal US government that was set up in 1953. The aim of the agency is to assist, aid, counsel and protect the interests of small businesses and to make sure that there is a free competitive atmosphere for them to thrive. The organization also checks that the overall business market undergoes a boom, so that the economy of the country becomes stronger.
The next question that arises is what makes a business a small business. There are various parameters that SBA applies to judge whether a particular business is a small business. You can go through the details regarding the size and standard at the official website of SBA. Even if your business qualifies for one, you don’t need to just rush to your nearest SBA office. You are required to go to a SBA office, only if commercial lenders see you as a risk-threat and refuse to lend to you. Here, it should be clearly mentioned that SBA does not give a loan, but merely acts as a guarantor for your loan. The agency promises to pay the commercial lenders a certain part of the loan, if you fail to repay it. Hence, in order to qualify for it, you need to have some personal finance, some investment amount, a good credit history and a solid business plan. Though SBA cannot stop the lender from charging certain fees, it can get the lender to loan you more money and for a longer period of time. The organization also opens the doors for start-up businesses that otherwise find it difficult to get a proper loan.
The loan amount can be used in various areas of the business such as purchasing inventory and expanding your operation. But it cannot be used for paying debts or buying real-estate for investment purposes. Franchising businesses get special considerations, but there are always certain conditions. If the franchisor retains power to control the franchisee to such an extent that it amounts to employment, then the business is not considered as franchise. The loan must be used to start a business where the franchisee gets a percentage of the profit generated. It helps tremendously if your franchisor is in the SBA Franchise Registry in order to speed up the process. Another thing that you are supposed to remember about SBA loans is that not all lenders have equal position in the eyes of SBA office.
Hence, find the best SBA-approved lender in your area and present your carefully created business plan. Whether you are businessmen looking forward to franchise your business or a new entrepreneur wishing to join the industry, SBA-backed finance is the best source to get money.
The Small Business Administration Can Be a Powerful Ally for Franchisees - To learn more about this author, visit Ray Flores's Website.
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Ray Flores
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