Getting funding for a franchise takes planning and preparation. One option is an SBA franchise loan. SBA lenders are everywhere. Youโll find banks, credit unions, and professional finance services all ready to help. Therefore, donโt just go with the first one you see. Compare lenders to secure the best rates and support for your franchise business.
If youโre interested in investing in a mobile cleaning franchise, see our guide on how much it costs to start a car wash.
What Is an SBA Loan for Franchise?
It is a type of business financing. SBA (Small Business Administration) loans are government-backed. To be clear, SBA doesnโt provide the funds. The money comes from private entities like banks and other financial institutions (e.g., Wells Fargo Bank and Chase Bank).
The SBA establishes lending guidelines and partners with approved lenders to help reduce their risk, making it easier for you to qualify for financing. Moreover, there are various loan programs to meet different financial needs. For instance, the 7(a) loan program is a popular option if youโre starting a new business or expanding an existing one.ย
SBA 7(a) Loan at a Glance
- There are different types of 7(a) loans. For example, Standard Loan, Small Loan, and Express Loan. The standard one is probably the most suitable if youโre serious about becoming a franchisee.
- It can be used as capital for small businesses, buying real estate, or refinancing eligible debt.
- Lenders typically look for a credit score of 640.
Pros and Cons of SBA Approved Franchises
Like any sort of franchise financing, there are advantages and drawbacks. So, looking at both sides will help you decide whether an SBA loan for franchise suits your plans.
Pros
- Loan Size: Up to $5 million.
- Lower Down Payments: I.e., often around 10%, often lower than a standard business loan.ย
- Longer Terms: Up to 10 years for working capital or 25 years for real estate.
- Government Guarantee: More peace of mind because the SBA guarantees a portion of your loan. For example, smaller loans of less than $150,000 are guaranteed up to 85% of the loan amount.
- Competitive Rates: Enjoy lower interest rates because the government partially backs the loans. However, rates vary based on the WSJ Prime and loan size and term, so always check current rates.
Cons
- Time Spent Contacting Lenders. The SBA wants you to prove that youโve already tried, and failed, to get financing elsewhere before qualifying for an SBA-backed loan. For example, have you looked at rollover for business startups (ROBS)?ย
- Paperwork: You need to gather a lot of documents for small business loans for franchise. I.e., financial statements, tax records, business plan. Again, this takes time.
- Size Standards: Your business must meet the SBAโs size standards to qualify for funding. So this may exclude you if youโre a multi-unit franchisee pursuing franchise growth.
- Credit History: You donโt have to be completely debt-free. However, heavy debt or a poor credit score can mean missing out on the loan.
- But if in doubt, contact a franchise consultant to walk you through the pros and cons.
SBA Approved Franchise List
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From August 1, 2025, franchisors must be listed on the SBA Franchise Directory for their franchisees to qualify for SBA-backed loans. There are thousands of brands registered. And the directory is updated weekly, so you can keep up to date with newly qualified franchisors. Here are a few examples:
SBA Loan for Car Wash: DetailXPerts
(SBA franchise identifier code: S0502)
DetailXPerts is a pioneer in the mobile cleaning business and car wash industry, thanks to its eco-friendly steam cleaning technology. So, you can use an SBA loan for your own car wash business, fleet washing, commercial janitorial services, or a mix of the three. This mobile franchise business model typically has lower overheads and greater flexibility than traditional automatic car washes. Initial investment ranges from $103,500 to $240,100.
Tommyโs Express Car Wash
(SBA franchise identifier code: S2297)
Tommyโs is an automatic car wash franchise. Therefore, it requires a much higher capital investment than a mobile detailing business because youโve got to buy the latest automated car wash equipment. Initial investment ranges from $5 million to $8.5 million. Less if you choose leasing over full ownership.
Kumon Childrenโs Business
(SBA franchise identifier code: S0962)
Kumon is one of the after-school education franchises, focusing on math and reading programs for kids. So, if you meet the franchisee requirements, you can apply for SBA loans to cover startup costs such as training, leasehold improvements, and working capital. Initial investment ranges from $74,000 to $166,000.
Pet Supplies Plus in the Pet Care Market
(SBA franchise identifier code: S1293)
If you love working with animals, then this could be your calling. Pet grooming and pet products are big business. Moreover, consumer spending on their pets has created a multi-billion-dollar market in the US. But to get started, youโll need sufficient capital to open your own brick-and-mortar store. The initial investment is $536,000 to $1.9 million.
Matco Tools in Retail
(SBA franchise identifier code: S1088)
Matco Tools is part of the mobile retail tool distribution industry. As a franchisee, youโll provide mechanics and technicians with professional-grade tools directly at their workplaces. The initial investment ranges from $108,000 to $383,000.ย
SBA Franchise Eligibility Checklist
Franchisors donโt have to pay to be in the SBA Franchise Directory. But there is an approval process that everyone has to go through. Brands must submit their:
- Franchise disclosure document (FDD).
- Franchise agreement.
- Signed franchisor certification.
- SBA identifier code.
- Also, lenders need to independently verify if the company is listed in the Franchise Directory.
To be eligible, franchisees must meet specific requirements as well. For instance, this includes size standards, creditworthiness and credit-elsewhere test. See how to apply for a SBA loan, below.ย
How to Apply for an SBA Loan?
If you decide this is how you want to raise capital, use a simple franchise checklist to organize your financials and business plan. Here are the steps to applying for an SBA loan:
1. Choose Your Loan Program
For most franchisees, that will be an SBA 7(a) loan. Bear in mind, your business must be for-profit and operate in the United States or its territories. Also, there is a criminal background check. Equally important, if you have franchise partners, keep them notified of your loan requests.
2. Prepare Your Financial Documents and Business Plan
Youโve got to show that youโve invested equity in the business and have no recent bankruptcies. Also, you need an excellent business plan and good knowledge of the franchise value.ย
Additionally, outline franchise fees, royalties, and marketing costs so your cash flow projections stay realistic. If youโre unsure of anything, have a list of questions to ask the franchisor. Simply put, the more informed you are, the better. The lender wants to know youโre clued up on where the money goes.ย
Make the plan professional, telling how your business is going to make a healthy profit. Use financial statements, charts, spreadsheets and relevant franchise information. Numbers may be boring to us, but accountants love them. Download SBAโs document requirements and start preparing.
3. Find a Lender
Next, choose a lender based on your preferences. Maybe you want to transact with a bank thatโs near your business location. Use SBAโs enhanced Lender Match feature to find the right lender for you. Most offer an online application option.
4. Submit Your Loan Application
Gather all those documents you prepared in step 2 and submit your loan application. Also, check with your chosen lender to see if they have any additional required documents.
5. Wait for Lenderโs Decision
After you have given all the required documents, the lender will review your loan application, perform a credit analysis, do some background checks, and review your business case. If you use the SBA franchise financing, then the stability of the franchise company will play an important part. This may take anywhere from a few weeks to a month.ย
6. Approval and Authorization
The lender approves your loan! But youโre not quite finished. The lender prepares the SBA loan authorization. This is an agreement between the SBA and the lender pertaining to how the SBA will guarantee the loan. So, the lender completes loan underwriting and does some more paperwork. Loan underwriting determines whether a lenderโs loan is an acceptable risk. ย The lenderโs underwriters will assess your ability to repay the SBA loan.
7. Closing and Funding
Finally, all parties to the loan (lender and lendee) sign the legal documents and agreements. This is another round of document review and possibly preparation of new documents. Review the SBAโs pre-close document checklist or request a checklist from your lender.
Loan closing is the last opportunity for the lender to check for any problems, such as eligibility or credit issues, before they release the loan.
Lastly, respond promptly to your lenderโs requests for additional information and documents. Processing and getting an SBA loan for franchise investments is a detailed process. Keep your wits about you, pay attention to the process, and you should get your SBA loan โ and enjoy the benefits of franchising.
Conclusionย
To sum up, an SBA loan for franchise with government-backed support can make it a lot easier for you to get capital if youโve exhausted other options. On the other hand, SBA eligibility doesnโt guarantee success. Equally important, seek advice from a franchise lawyer. Whatever type of financing you choose, do your due diligence and understand the pros and cons before signing any document.
DetailXPerts meets all the SBA lending requirements, earning a place in the official SBA Franchise Directory. And adhering to stricter procedures helps reduce the risk of improper loan guarantees. So, if youโre investigating car wash financing, an SBA loan could help you out.ย
Download our business model overview to learn more about our mobile cleaning opportunity based on a proven system using steam cleaning technology. ย
