Why an SBA Bank Loan in 2023 is still the best overall financing for your Franchise Investment?

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Don Johnson

Don Johnson has over 25 years of business ownership experience having owned and sold two successful businesses. Don has been involved in business and franchise lending for over 20 years as an owner of Diamond Financial Services (New Jersey office) as well as Principal and Director of Business Development for A. B. Nicholas, LLC, a specialty lending firm.

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For over 20 years, my company, Diamond Financial (FranchiseLenders.com), has specialized in Small Business Administration (SBA) government loan services, (which is the most popular and common small business lending program) with high success rate, nationwide, working with the most aggressive pro-franchise Banks.  I often get asked “Which is the best type of franchise business loan to help me start-up, expand or acquire a business”?

The following are the main reasons, in my opinion, why a loan request under $3 million, getting an SBA 7 (a) loan still offers the best option for you:

  1. Many banks offer SBA Franchise Loans nationwide, but finding the right one is the key!  These banks get “protected” by the government (in case of loan default) so some will be more aggressive to fund you.
  2. SBA rates can never exceed 2 1/2% over prime, so your rate will always be competitive and even less if you are with the right Franchise SBA Bank.
  3. Getting an SBA loan will create a bank relationship for potential long term and future funding options.  Yes, Banker relationships still exist!
  4. Working Capital (to cover weekly business expenses, advertising, etc.) is included with an SBA loan, usually a high amount if needed, which every company needs and is very important.
  5. SBA loans offer longer terms, up to 10 years for start-ups, expansion and acquisition, and up to 25 years if commercial real estate is included as part of the loan.
  6. Lower down payment/out of pocket (5-20%) for a franchise SBA Loan compared to non-SBA lenders who are usually at 25-30% or more capital injection.
  7. Preserves cash with lower down payment to give you much more flexibility for future expansion franchise lending and more liquidity.
  8. Personal collateral is not as important or needed if with the right SBA Lender for a franchise business.  Most banks need high or full collateral (to match the loan size) and do not want to take on risk, especially for a start-up.
  9. A good SBA Lender will be able to work around a past negative in your credit or personal history, which most people have (lost job, a late payment, lower collateral, etc.) and will provide better services. (Isn’t it nice to be able to pick up the phone and speak with a banker, someone who cares and wants to help you and your family with Franchise Financing to succeed?)

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