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The Small Business Administration Can Be a Powerful Ally for Franchisees

Written by: Michael Hemenway

Article Overview: The Small Business Administration is a market regulator for the franchise industry, providing guarantee for lenders, so that the market flourishes. By guaranteeing loans issued to small business owners -- including franchisees -- the SBA makes it easier to attain these loans. Franchise businesses get special considerations when it comes to attaining these types of loans.

The Small Business Administration Can Be a Powerful Ally for Franchisees

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.

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Article Tags: atmosphere, boom, business market, business plan, checks, commercial lenders, credit history, doors, guarantor, independent agency, investment purposes, parameters, paying debts, period of time, personal finance, sba office, small business administration, small businesses, starters, us government



Related Forum Posts
These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Resources within the government - One of the first things I did as I started up was to take a few classes offered by the Small Business Administration. I'm not sure if Nigeria offers similar services, but people from the United States can tap into those resources pretty easily. The classes offered a business planning template, time to start your plan and great advice from other entrepreneurs. Best of luck!
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
canada resources - I used to have a connection to a franchise consultant in Canada at "Franchise Officer" in Toronto. I wish I could remember his name ( but I can check my files at the office tomorrow). Anyway, he had a lot of connections to banks in Canada. He may know of them and may be able to offer some feedback. If you are looking for a business loan, Canada has similar business loan programs to that of the USA's Small Business Administration (SBA). I think its SLBS in Cananda, and I probably have the list of it's lenders in my office also. Do you think either can be helpful? If so, I can get back to you with this information tomorrow. Let me know!
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.


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