Applying for small business loans to purchase a franchise can often be an intimidating process. The idea of navigating the complex world of finance, dealing with lenders, and presenting a compelling business plan can be overwhelming for aspiring entrepreneurs. The fear of rejection and the uncertainty surrounding loan terms and interest rates can further discourage potential franchise owners. However, despite these challenges, there are great options available to ease the intimidation factor!
Many financial institutions offer specialized loan programs tailored specifically for franchise businesses. These programs can provide valuable guidance, support, and favorable terms to make the loan application process less daunting. Additionally, franchise brands often have established relationships with lenders, which can simplify the process and increase the chances of securing funding. With the right research, preparation, and assistance, individuals interested in purchasing a franchise can find the support they need to overcome their initial intimidation and embark on a rewarding entrepreneurial journey.
If you need to finance the purchase of a franchise, and you want to turn that financing around relatively quickly, a portfolio loan or a low-doc SBA loan may be the way to go. There are similarities, such as faster turn-around time, and differences with each type of loan.
Should I use a portfolio loan to buy a franchise?
Portfolio loans are a lesser-known means of financing but offer considerable benefits if you qualify. Portfolio loans, sometimes known as stock loans or securities-based lending, use your assets as collateral. You can use your investment or retirement funds in stocks, bonds, or cash. Portfolio loans can be advantageous for business financing, and they can be especially beneficial to retirees who have investments or retirement accounts that can be leveraged.
These loans allow you to leverage your securities without having to liquidate. Small business owners can usually borrow up to 80 percent of the amount of their portfolio, and the result is access to a revolving line of credit that you can use to fund your franchise.
Requirements for portfolio loans include:
- A minimum of $85k in brokerage accounts.
- Securities publicly trading at $10/share or higher.
In addition, Portfolio Loans feature low-interest rates and unbelievably fast close times. Realistically, you can get one of these loans in just 10 days.
Should I use a low-doc SBA loan to buy a franchise?
SBA Loans are a tried-and-true method of franchise financing. The Small Business Association offers many loan programs which are made through lenders who partner with the SBA. These loans are government-backed, meaning the SBA guarantees a portion of the loan to the lender in case you default. This guarantee makes it easier for lenders to approve small business loans.
SBA loans help alleviate the risk associated with lending money to business owners and entrepreneurs who may not qualify for traditional loans. The benefits of SBA loans for borrowers are many and include:
- Low-interest rates
- Low repayment terms
- The ability to be combined with other financing
Unlike typical SBA 7(a) loans , which may require up to 2-3 months to be finalized, SBA Low-Doc Loans can be completely finalized within 45 days (or even sooner). If you’re seeking between $15,000 and $150,000 in franchise financing, it may make sense to apply for a SBA low-doc loan. With these loans, you receive the benefits of a traditional SBA loan with a much quicker turn-time.
Requirements for low-doc SBA loans include:
- A 690+ credit score.
- 10% equity injection.
- A credit history that is devoid of bankruptcies.
Our partner’s team of experts can pre-qualify you for a portfolio loan in minutes. Plus, if you utilize our partner to facilitate your loan, you’ll receive a 4 percent flat rate for the setup, which can be drawn from your total loan amount, leaving you with no out-of-pocket expenses.
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