Top Banks for Small Business Franchise Loans

Last update: May 2, 2022

 

  find me a Franchise lender

The idea of owning a franchise attracts a lot of new small business owners. There are inherent benefits that they can take advantage of. The brand value is already there, customers know about the products and the demand exists. Buying a franchise business can thus enable new entrepreneurs to hit the ground running. According to the US Census Bureau, 10.5% of all businesses in the country are franchises and they account for almost 3% of the national GDP. The entire sector comprises over 780,000 businesses.

Even though there’s a great opportunity for growth in this industry, the barrier to entry remains quite high which is one of the reasons why new business owners can struggle to obtain small business franchise loans. Banks are typically wary about lending to those who have no prior experience running franchise businesses successfully. The SBA franchise loans are a crucial lifeline for all those business owners who are unable to obtain conventional small business franchise loans.

 

Benefits of owning a small business franchise

 Buying a franchise is an attractive idea for new business owners since they receive business assistance from the franchisor. This could be anything from an entirely turnkey operation complete with equipment and supplies to in-depth guidance on successfully running the business.

Furthermore, the brand is already well recognized and customers rely on the products. This lowers the failure rate for business owners as they essentially become part of a successful brand that pulls in a steady stream of customers.

 

How to get a loan for a franchise

There’s no shortage of banks and other lenders that are willing to provide funding for a franchise, however, the process is often quite tedious and there’s a higher chance that you might be turned out, particularly if you don’t have prior experience in the industry. Even if you do get approved, the franchise loan requirements would probably be untenable.

That’s what makes SBA loans for franchises such an attractive option. Since these loans are guaranteed by the Small Business Administration, it’s possible for business owners who even have low credit scores and limited credit history to get a franchise bank loan. The banks, credit unions and other lenders are happy to sanction the loans in this case as a big chunk of it is guaranteed by the government. You can even get an SBA loan to buy an existing business franchise.

SBA Franchise Loans

Both new and existing business owners can take advantage of the SBA franchise loans. The Small Business Administration has partnerships with lenders in all 50 states, thereby providing borrowers with a lot of options to choose from once they’ve decided to obtain a franchise bank loan.

This is the preferred option for most business owners as the franchise loan interest rates offered on the SBA programs tend to be considerably lower than those for conventional bank loans. This makes it possible for business owners to get the financing they need at low-interest rates with long repayment terms, thus providing them with a lot of leeway to get their business off the ground.

Given that franchise fee for most businesses can cost upwards of $50,000, the SBA 7(a) and 504 loans are the best SBA franchise loan options.

 

SBA 7(a) loan for franchises

 The SBA 7(a) loan is essentially the most suitable option for a franchise. Business owners can obtain up to $5 million in funding that needs to be repaid in 10 – 25 years. The interest rates tend to be lower than regular franchise loan interest rates, usually in the 4.5 – 5.5% range but it may vary depending on the lender, the amount required, and other conditions.

You can use the SBA 7(a) loan to cover initial franchise fees, acquisition of equipment, furniture and fixtures, inventory, working capital and other startup costs. The funds can also be used to acquire land upon which to construct the franchise or to acquire existing franchises.

Almost all of the business expenses that you might have can be covered with the SBA 7(a) loan. There is one important exception to keep in mind. Any ongoing franchise or royalty fees can’t be paid through the SBA 7(a) funds.

The list below includes the rest of our best SBA approved lenders for small business franchise loans:

RankBankBank Name / Franchise Name# of LoansAvg LoanAvg RateAvg Term
1Stearns BankStearns Bank466$248,0026.8%122
Supercuts19$120,0686.8%109
Fedex Ground11$469,1006.9%121
Club Pilates11$148,8916.7%123
ILOVEKICKBOXING.COM11$198,6096.9%123
2Wells FargoWells Fargo336$543,7116.2%137
Anytime Fitness32$479,0256.4%117
Jimmy John'S15$549,8206.2%150
Orange Theory Fitness13$608,6086.2%134
The Goddard School10$1,484,4205.3%206
3The Huntington National BankHuntington National244$346,8456.4%114
Subway7$82,8576.0%81
Anytime Fitness6$209,6176.3%92
X-Golf6$283,1837.0%102
Ace Hardware5$904,0006.3%138
4Celtic BankCeltic Bank223$360,4546.6%137
Experimac14$150,0006.6%120
Mr. Appliance6$195,9006.8%120
Patrice & Associates6$129,1676.6%120
Tutor Doctor5$140,0006.6%120
5Spirit of Texas BankSpirit of Texas Bank197$346,6136.4%125
European Wax Center32$380,6316.4%119
Sport Clips31$223,2266.4%119
Club Pilates20$236,7706.5%120
Amazing Lash Studio13$370,7386.4%120
6JPMorgan Chase BankJPMorgan Chase Bank141$342,4666.3%105
Jimmy John'S5$417,3404.7%115
Orange Theory Fitness4$337,5005.5%123
Fedex Ground4$568,5755.8%112
7United Midwest Savings BankUnited Midwest Savings Bank138$260,8516.9%129
Signarama9$150,0006.9%120
Five Star Painting7$123,3337.0%120
Tutor Doctor4$145,0007.0%120
8U.S. BankU.S. Bank86$396,8176.7%125
Anytime Fitness5$269,8006.6%120
The Ups Store4$144,4756.4%120
MASSAGE ENVY4$313,7256.3%120
9TD BankTD Bank81$414,0248.0%106
The Ups Store5$90,2005.2%113
Subway4$255,0007.4%123
10Radius BankRadius Bank79$679,9086.7%132
Orange Theory Fitness19$787,7746.6%124
Massage Envy6$1,069,3836.5%117
11M&TM&T69$275,0346.9%94
Ilovekickboxing.Com3$138,3336.5%94
Kiddie Academy3$496,5506.4%90
12Byline BankByline Bank64$932,0296.7%162
Dickey'S Barbecue Pit11$428,0546.7%123
13Newtek Small Business FinanceNewtek Small Business57$619,9236.8%150
True Value Hardware4$500,0006.6%252
14United Community BankUnited Community Bank56$747,2556.5%147
Ilovekickboxing.Com5$287,8006.7%125
15KeyBankKeyBank53$649,7456.4%140
Subway4$128,7506.8%94
16Live OakLive Oak48$2,100,9436.2%206
Ameriprise Financial23$474,0916.6%120
17Compass BankCompass Bank45$978,3456.0%150
The Goddard School6$3,165,8335.0%310
18BankUnitedBankUnited43$1,640,4416.2%231
Best Western Inn5$2,351,8006.0%300
19NOA BankNOA Bank41$1,301,5175.9%259
QUALITY INN/QUALITY SUITES, HO5$1,440,0006.0%300
20Bank of GeorgeBank of George41$2,015,1606.1%300
Quality Inn/Quality Suites, Ho10$2,122,7005.4%300
Super 88$1,412,0005.9%300
21SunTrust BankSunTrust Bank39$794,1156.2%137
Allegra Network3$427,0006.1%108
22First Home BankFirst Home Bank39$236,0616.8%120
Party Princess Productions2$904,0006.8%120
23PNC BankPNC Bank38$194,3256.7%91
CycleBar4$400,2506.8%96
24Citizens BankCitizens Bank36$959,2386.4%171
Marco'S Pizza5$326,5506.6%124
25The Bancorp BankThe Bancorp Bank36$635,1166.5%145
Fantastic Sams15$210,3076.6%136

 

  find me a Franchise lender