Bank Financing

Financing for franchises and other small businesses is available through many banks in the form of commercial small business loans. It is not always easy, however, to be approved for these loans.

Because banks use their depositors’ dollars when making loans, they tend to be conservative about doing so. Many banks have strict requirements that potential borrowers must meet in order to be granted a loan. It is especially difficult for start-up businesses to get loans because banks are wary of lending their depositors’ dollars to companies that don’t have proven track records.

Franchisees are going into business with proven methods of operation and successful products. This can ease the mind of some lenders and make them more likely to grant a loan. In addition, some franchisors have established relationships with certain lenders, improving a franchisee’s chances of receiving a loan from that lender.

While bank loans without SBA guaranties are harder to qualify for, borrowers do benefit from not having to pay the SBA guaranty premium, which amounts to one-half of one percent of the loan.