FAQ

Borrower’s Frequently Asked Questions

LoanBox

The innovative lending platform makes everything instantly easier and faster. You no longer have to call a bunch of banks and try to figure it all out. Log onto the app, answer questionnaires, complete your loan package, and the platform will match you to the right lenders. Select which lenders you want to access your loan package and offer a loan proposal. Receive loan proposals from interested lenders, select the winning lender, and always know what’s going on from application to funding and what’s needed next in the loan process. The LoanBox app is similar to Carvana but for business loans, offering an easy path and stress-free ride to funding your growth. Take the wheel, control your own loan journey, and make your business loan a reality, one click at a time.
Do It Yourself Loan App
Everything you need to complete your SBA loan yourself is available on this portal. You have all the tools at your disposal, eliminating the need to scour the internet for information, which is often too general and not tailored to your specific small business or franchise needs. Use the included FAQ if you have any questions, and take advantage of AI avatars we've hired to explain different SBA loan topics. Everything you need for your business loan is consolidated in one place: here.
Free LoanBox Advisor
While you could do it yourself and achieve great results, some of you might prefer not to navigate this process alone. Especially when you have access to a free loan advisor who can manage everything for you. Your advisor acts as your advocate, carefully handling the loan process from obtaining loan proposals to recommending the best lender for your loan type at this specific time. They will also work directly with the lender on your behalf through to loan closing. Simply upload your documents, and we handle the rest.
LoanBox Unmatched Matching
LoanBox is unmatched in its ability to secure big loans for small businesses. Our platform specializes in matching small business and franchise owners with the right lenders tailored to their specific loan requirements and unique circumstances. The larger small business loans are often used for purposes like acquisitions, expansions, partnership buyouts, joint ventures/mergers, succession buy-ins, and commercial real estate. In these critical scenarios, the last thing a business owner needs is a prolonged approval process ending in rejection or an unfavorable agreement. Delays in securing necessary funding can significantly impact a business, sometimes resulting in lost opportunities.
LoanBox employs advanced technology to ensure your significant small business loan is paired with the most appropriate lenders. When business owners submit their loan packages—comprising their application and documentation—LoanBox algorithms immediately begin calculating and cross-referencing against the criteria of top-ranked lenders. This includes national lenders, specialty niche lenders, SBA lenders, conventional only lenders, and local lenders in every state. The platform’s next-level filtering and matching system considers multiple criteria such as:
1. Credit scores
2. Debt service coverage ratio
3. Years in business
4. Startup status
5. Guarantor and collateral requirements
6. Debt-to-income ratio
7. Loan-to-value ratio
8. Industry
9. Franchise brand
10. Borrower type
11. Loan type
12. Loan purpose
  + Other qualifying metrics
By targeting loans with precision, LoanBox saves business owners valuable time, reduces costs, and alleviates stress from working with unsuitable lenders.
Choosing an incompatible lender is the leading cause of the frustrating and stressful lending experiences faced by many small business owners and franchisees. Each year, thousands of entrepreneurs seek financing from banks that have a low probability of approving their loan.
Applicants tend to randomly select lenders that don’t specialize in their industry, business type, or loan amount — mistakenly believing all banks are alike in the context of SBA loans or small business financing, and that the only difference lies in interest rates.
When delays from not getting it right can result in losing out on the deal all together, why do entrepreneurs often find themselves on the wrong path, wasting weeks only to have to start over elsewhere? The obvious answer is because most business owners don't have access to a crystal ball. With the launch of LoanBox, business owners finally have something that’s much more reliable, predictable, and repeatable.
Don’t waste time and effort getting rejected by the wrong lender.
Want to cut to the chase and get it right the first time? Then think about experience, focus and criteria during lender consideration and selection.
LoanBox does this for you.
LoanBox lenders are carefully chosen for their expertise, rankings, and our analytical vetting process.
Our platform features a diverse range of lenders, from national powerhouses to regional banks, niche industry banks, community banks, and credit unions, each bringing unique strengths.
They are all eager to compete for your small business and franchise loans, whether locally or nationally.
National Lenders - Our portal includes many of the top national SBA lenders, featuring those ranked highest in terms of the number of SBA loans, dollars funded, and franchise lending. 6 of the 10 top SBA Lenders over the last year are on LoanBox.
Industry Lenders - Each industry has its own top-ranked lenders. Lenders who join the LoanBox portal system, specializing in your industry, will see your business profile as a suggested match and can request to become a preferred lender on your portal. LoanBox has a good group of the top 10 lenders from every business sector with the exception of Public Administration and Utilities.
Local Lenders - We also feature top local SBA lenders and highly ranked state lenders, providing a local lending option to your business. You may initially be thinking an SBA loan but a local lender provides a conventional proposal, especially with real estate.
LOANBOX HAS YOUR LOAN COVERED BUT WHAT ABOUT EVERYTHING & EVERYONE ELSE?
Lending Ecosystem Vendors
The lending landscape encompasses a wide array of vendors, as it intersects with numerous sectors. Essential professionals may include contractors, attorneys, credit card processors, life and business insurance agents, escrow agents, business valuation firms, acquisition consultants (both buy-side and sell-side), appraisers, financial advisors, estate planners, tax consultants, CPAs, and various types of lawyers. These experts can play a crucial role in securing startup loans, acquisition loans, partner buyout loans, and commercial real estate loans.
Vendors Matched for Your Needs
Vendors fill out a detailed profile form, and their information is matched with borrower inputs. Once the borrower completes their loan package, a tailored list of compatible vendors is generated on their dashboard for quick and convenient access. For instance, if you're looking for an acquisition loan, LoanBox not only displays qualifying lenders but also highlights matching vendors, such as a purchase agreement attorney who specializes in your specific industry.
Search for the Right Vendors
LoanBox operates as a free platform for vendors and suppliers, providing them with visibility at no cost. This allows them to offer their best pricing, as we do not take a commission. You can easily search the portal and utilize filters to find the vendor that suits your needs. A simple click reveals the contact card, while another click displays the full vendor profile. Please note that not all vendors with contact cards will have complete profiles.
Loan Advisor
Although the app is easy enough to do everything yourself, some prefer someone to just take care of everything for them. If this sounds like you then we’ve got you covered.
Get free advice, guidance, and hand-holding from beginning to end. Our LoanBox Advisors provide friendly support and help handle everything about your loan for and with you.

A LoanBox Advisor is a friendly human who supports you in all aspects of the LoanBox and helps handle everything from getting started and answering questions, to providing support along the way.
Get free support whenever you need it in all aspects of utilizing the app.
Do I have to download anything?
No, you can access the platform directly through our website by logging in each time. However, downloading the app takes just seconds, enhances formatting across multiple devices, and is easy to uninstall after your loan is closed. You can access the app from our website by clicking any of the Start Loan buttons. Once signed in, you have the option to continue using the web platform or download the app at any time. The app provides a convenient desktop icon and an adaptive screen experience for your phone, tablet, or laptop.
LoanBox Manager
Banks are integrated with the LoanBox platform with each bank having their own independent app. When the borrower selects the winning lender proposal the LoanBox turns from loan packager to loan manager for the borrower. The LoanBox manager populates the loan process and documents needed for each stage. The Loan Manager tracks the process of the loan, shows what docs are needed and when they are due, and the app-to-app messaging makes time stamped message communication. Borrowers are able to upload ongoing documents. When the lender changes the process stage in the kanban pipeline the LoanBox manager sends an alert to the business borrower (and to franchisor for white labeled apps).

Loans

All SBA programs, USDA, Lines, Leasing, and conventional term loans are available on LoanBox. The vast majority of the SBA loans are in the SBA 7(a) program.
Loan Programs Include:
SBA
Conventional
USDA
ROBS
Loan Purposes Include:
Startup Business
Startup Franchise
Expansion Franchise
Business Purchase
Partner Buyouts
Multi-Unit Expansion
Multi-Brand Expansion
Debt Refinance & Consolidation
Working Capital
Credit Lines, Bridge Loans, & ABLs
Equipment Financing
Investment Property
Commercial Real Estate
Leasebacks
Terms
The standard SBA 7(a) loan not involving property is a 10 year term with matching 10 year amortization.
Straight property SBA 7(a) loans are on 25 year terms. Combining non-property loan will mix up the terms available. If the property portion is $1 more than the non-property loan portion then the whole loan amount would still be on a 25 year term.
If the non-property amount of the loan is larger than the property portion then terms can still extend anywhere from 12 to 17 years.
Rates
Interest rates are based on the prime rate currently at 8.50% plus the bank spread. The SBA puts caps on the spread based on if the loan is variable or fixed, the program, and the loan amount. Depending on the type of loan and amount currently rates can range from the mid 9% range to the mid 11% range. See Rates FAQ.
Amounts
The SBA guaranty goes up to $5 million and many of the preferred lenders will offer pari passu loans that adds a conventional sleeve to get the total loan amount to $7 million.
While there isn’t a minimum, many lenders will not move forward with loans under a certain minimum amount like $100,000 or $150,000. There are also lenders who have never funded an SBA loan over one million and aren’t going to start with you. It’s all about matching to the right lender for the amount (amongst other things) you need.
Loan Package
Having an organized and complete loan package is imperative whether you're navigating the process independently or utilizing a LoanBox Advisor. Within the portal, you'll be required to answer a series of questions and upload necessary financial documents. These answers and documents are then systematically compiled into PDF formats within your portal. This initial collection of documents is critical for lenders to provide you with a loan proposal. Typically, these documents include the application, personal financial statement, business plan, pro forma, and tax returns. LoanBox's advanced matching algorithms will identify lenders you qualify for based on your loan package and provided responses. You have the option to select one or multiple preferred lenders to review your loan package and invite them to submit loan proposals. Rest assured, your loan package remains securely housed within LoanBox, and access is granted to lenders within the same secure environment.
Business Plan & Pro Forma
LoanBox streamlines the creation of your loan package by transforming your responses to a series of questions and forms, along with your uploaded financial documents, into a comprehensive document set within the portal. Our collaboration with franchisors and preferred lenders ensures your business plan follows an approved model. Simply input or paste your answers in the portal, and LoanBox will generate a professional business plan PDF as part of your loan package. This document is editable, shareable with lenders, or downloadable for your records. Similarly, the pro forma, which includes financial projections, is effortlessly created by answering a few targeted questions on the questionnaires. This pro forma is also approved by your franchisor and preferred lenders, ensuring it meets all necessary criteria.
Receive & Accept Loan Proposals
Once your loan package is ready, lenders can securely access the documents and respond with their loan proposals. Each proposal follows a standardized format, enabling you to easily compare key information across proposals. When you are ready to accept an offer, you can finalize the process with a simple click and e-signature. To aid in your decision-making, detailed information and videos about each preferred lender are available for review. Should you opt to work with a LoanBox Advisor, they will offer insights into which lender is best suited for your specific loan needs at the current time. Nevertheless, the final choice remains yours.
LoanBox Manager
The integration of preferred lenders within the LoanBox system ensures a seamless transition through the loan process. Upon selecting a lender's proposal, the Loan Manager tool generates the necessary steps and documents required for each stage of processing with that specific lender. The Loan Manager provides real-time tracking of your loan's progress, indicates required documents and their deadlines, and features a time-stamped message board for updates and notes from the lender. Additionally, it allows for the secure upload of documents, ensuring that only your selected lender has access.
10 Steps of the LoanBox process:
1. Direction Decision
Decide if you want to do your LoanBox loan alone or use the LoanBox Advisor navigation available to you. LoanBox was designed for the business owner to have a carvana like experience with a business loan. You can utilize LoanBox from application to funding, have a full suite of intel and resources to access to answer your questions, an AI lending assistant, and human chat and app-to-app messaging support. This is how a bank business loan get's done with the least amount of human interaction as possible.
Or, for those who haven't lost faith in humanity completely yet, have one of our friendly LoanBox Advisors just handle everything for you.
2. Loan Package
If you go it alone or use an LoanBox Advisor, a loan package is required. Complete a series of questions in the portal and upload financial docs. Your answers are populated into PDFs on your portal. This is the initial collection of documents needed for a lender to provide a loan proposal. These can include application, personal financial statement, business plan, pro forma, and tax returns.
3. Share Package
Our matching algorithms reveals the lenders you qualify for within our platform based on your loan package and answers. Select which (or all) of the preferred lenders you would like to provide access to your loan package and invite them to make a loan proposal.
Your loan package sits securely within LoanBox. The lender is also on LoanBox and sharing your loan package is giving the lender access to your package within LoanBox.
4. Receive Proposals
Lenders are able to securely access your loan package documents and interested lenders respond with a loan proposal. All proposals are created by the lender completing the same offer form within LoanBox. This consistent proposal format allows you to compare and contrast the same key information.
5. Select Lender
Click and e-sign to accept the winning proposal. There are videos and details about each preferred lender you can review for any due diligence. If you are using an LoanBox Advisor they will tell you which lender they want to use and why, for your specific loan at this specific time. Either way, it is your choice and decision.
After the winning lender is selected your "My Loan" dashboard shifts from loan packager to loan manager mode. All preferred lenders are connected to the portal and your LoanBox Manager automatically launches for the ongoing documents and exact process to funding for the preferred lender selected. If you are using the LoanBox Advisor option they will still update everything into your portal so you can always see where your loan is in the process and what is needed next.
6. Underwriting
Your credit score is pulled and your loan officially goes into underwriting. This is where the bank analyst reviews the loan package, runs their own cash flow analysis, checks that required documents to date are in and everything is in order, asks any additional or clarifying questions, and makes sure your loan meets bank policy criteria and requirements.
7. Approval
Depending on the loan amount you may have one approver, two approvers or a committee who will be signing off on your loan. When your loan is officially approved you receive a commitment letter. The commitment letter means that once all closing docs have been completed the bank is ready to fund the loan.
8. Closing
The closing process is getting everything ready for funding. When all required documents are collected the bank issues their internal “clear to close” sign off. LoanBox helps you collect the needed documents in advance and to always know where your loan is in the process.
9. Funding
The loan agreement docs are executed and funds are wired to recipients. The LoanBox Manager walks you through every step and provides every document request needed along the way.
10. Covenants
Covenants is the ongoing responsibilities you have as a borrower while the business loan is in place. Conventional and SBA lenders may have different requirements. Covenants primarily consists of providing annual tax returns and an updated personal financial statement each year. This is common with any business loan from a bank. Whatever the covenants are of the lender you selected, it will show on your LoanBox Manager and you will receive an automated email reminder each year from LoanBox. You can even use LoanBox to upload ongoing covenant docs and the lender automatically receives notification and access.
What is an Equity Injection?
An equity injection represents the borrower and in a way the seller's "skin in the game" for an acquisition loan. It indicates the infusion of either cash or assets into a deal to reduce the leverage of an asset or equity purchase. This injection can come from the buyer as a cash down payment, or a seller can contribute equity by providing a promissory note for a portion of the purchase price. Equity injections can therefore be satisfied through the buyer's down payment, with a seller’s note, or in some combination.
Understanding the New SBA Equity Injection Rules
The SBA equity injection rule stipulates a ten percent equity injection on loans that lead to a change of ownership. This rule applies to the total project costs and not the loan amount. The 10% equity must come from a source outside the business's existing balance sheet.
Change of Ownership Loans
These loans entail acquiring a business, assets, or equity, where the ownership is entirely transferred from the seller to the buyer. These loans include new business purchase loans, expansion business purchase loans, and complete and partial partner buyouts.
For changes of ownership resulting in a new owner (complete change of ownership): At a minimum, SBA requires an equity injection of at least 10 percent of the total project costs, (all costs required to complete the change of ownership, regardless of the source of funds) for such transactions.
What are change of ownership loans?
A loan resulting in a change of ownership is when you are purchasing a business, assets or equity, whereby 100% of the ownership transfers from the seller to the buyer.
These include:
- A new business purchase loan
- An expansion business purchase loan
- And complete and partial partner buyouts.
Expansion Acquisition Equity Injections
Business Expansion Loans
Business Expansion Loans do not require an equity injection. When an existing business starts or acquires a business that is in the same 6-digit NAICS code with identical ownership and in the same geographic area as the acquiring entity and they are co-borrowers, SBA considers this to be a business expansion and not a new business.
Expansion Acquisition
When an existing business purchases another established business.
There is no down payment requirement for one business purchasing another business if three conditions are met.
1 - The target business to purchase is in the same industry
2 - The target business to purchase is in the same geographical area as your current business
3 - The exact same current ownership structure will be applied to the purchased business.
If all three of these conditions are met then no equity injection is required. If all three conditions are not met, then the ten percent equity injection rules apply.
Non-expansion Business Acquisition Equity Injections
Equity Injection If Cash Payment
The equity injection can be paid by the borrower in cash, preferably wired to the lender a week or two before the loan closing. The money can come from savings, investments, a Home Equity Line of Credit (HELOC), or as a gift (with a gift letter as proof). Lenders usually require the most recent account statement for verification.
Full Standby Note
The SBA made a big change to the full standby seller note. Now the seller can finance the full ten percent of the equity injection requirement.
No principal or interest can be paid during the first two years standby period.
This option enables the borrower to purchase a business with no money down.
Partial Standby Note
A partial standby is where interest only payments can be made for the first two years but not principal payments.
- The seller can finance up to 7.5% in a partial standby note.
- The SBA requires 2.5% to come from a source other than the seller.
- Adequate cash flow has to support the partial standby option.
Partner Buyouts
Equity Injections
Partner Buyouts Loans
When it comes to Equity Injection for Partner Buyouts, equity injections are applicable in both Complete and Partial Partner Buyouts. Neither allow for a seller promissory note option to contribute towards the equity injection requirement.
For changes of ownership between existing owners and for partial changes of ownership: When required, cash contribution can be either an amount sufficient to reflect a debt-to-worth ratio of no greater than 9 to 1 on the pro form balance sheet or in the amount of at least 10% of the purchase price of the business, as reflected in the purchase and sale agreement, whichever is less.
For partial changes of ownership, SBA will measure percentage of ownership post-sale for the purpose of determining who is required to provide a guaranty.
Complete Partner Buyout
A complete partner buyout is purchasing 100% of the equity owned by that partner. For the complete partner buyout there is a 10% cash down payment requirement unless two conditions are met.
1 - The borrower must have been active in the operations of the business and has been a ten percent or more owner over the last two years. This needs to be attested to by both the borrower and seller.
2 - A Maximum Debt-to-Worth of nine-to-one (9:1). This is determined based on the business balance sheet over the most recent year and quarter.
Banks have to be able to document both requirements.
Partial Partner Buyout
The partial partner buyout is when a borrower is purchasing part of the equity owned by a partner. The partner who is selling will remain on as a partner since they are selling just part, and not all, of their equity.
This loan also requires a ten percent cash injection unless two key requirements are met.
There is also the same nine-to-one maximum debt-to-worth condition and any remaining owners of the business who have twenty percent or more in equity, are subject to the SBA guarantor requirements.
This includes the personal guaranty and the property collateral requirements.
Calculating the 9:1 Debt to Equity Ratio
The 9:1 ratio for equity injection in SBA SOP for partner buyout loans is a measure of a business's financial health. This ratio compares the business's debt to its equity, which represents the amount of capital invested in the business by its owners. A lower debt-to-equity ratio indicates that the business has more equity and is less reliant on debt, while a higher debt-to-equity ratio suggests that the business is more heavily indebted.
Calculating the 9:1 Ratio: To calculate the debt-to-equity ratio, divide the business's total debt by its total equity. For example, if a business has $500,000 in debt and $100,000 in equity, its debt-to-equity ratio would be 5:1.
Interpretation of the 9:1 Ratio: The SBA considers a debt-to-equity ratio of 9:1 or higher to be indicative of financial risk. When a business's debt-to-equity ratio exceeds this threshold, it may be required to inject additional equity into the business to demonstrate its financial stability and reduce the risk of default on an SBA loan.
Which insurance policies do banks require for business loans?
Business loans require the borrower to have certain insurance policies in place. These requirements vary depending on a number of factors including but not limited to lender credit guidelines, loan type, loan amount, industry type, etc. These factors will in turn dictate the insurance policy requirements, including coverage amounts, certificates and document specifications, and ongoing policy requirements.
SBA lenders have both their own internal policies, along with SBA requirements to contend with. While SBA requirements are of course not applicable to commercial non-SBA lenders, their policy requirements can be just as extensive and in some cases, even more, cumbersome than what SBA lenders require.
For loans under $500,000 the SBA defers to the lender internal insurance requirements. For loans above this these are the required policies.
Life Insurance: Most business loans will require a life insurance policy - typically known as key-man or loan guarantee coverage - for the amount of the loan to protect the lender should the borrower pass away during the term of the loan.
General Liability: Commercial General Liability insurance policy is required to cover bodily injury, death and property damage.
Errors & Omissions: When applicable professionally) Certificate of Errors and Omissions -E&O insurance in an amount of not less than the loan amount for protection against claims relating to the professional services provided by the Guarantors and the Borrower.
Workers Compensation: Certificate of Statutory workers compensation insurance required for employees in connection with the advisory business - if there are employees.
Hazard Insurance: Various forms of hazard insurance and clauses may also be required - specifically if real estate is being taken as collateral or if there are substantial tangible business assets. Commercial non-SBA lenders will typically have fewer requirements than with SBA loans.
What if I cannot qualify for life insurance?
You can typically get around a borrower who is ineligible for life insurance with an SBA loan. In this case, an insurance rejection letter and continuity/succession plan is required.
Can insurance requirements delay my SBA loan?
Yes, these are required funding documents on the SBA side.
Late Loan Payment Management
When facing distressed loans, ensuring timely payments is pivotal to maintaining a stable financial standing, especially for independent business owners. If you foresee financial trouble for an extended period—say, a year—it's imperative to communicate openly with your lender. Short-term solutions like a three or six-month forbearance can provide immediate relief, but consistently delaying payments beyond 60 days can raise significant red flags with your financial institution. Prolonging overdue payments can fatigue lenders and negatively impact consumer credit numbers, making it a less viable long-term strategy.
Communication and Payment Timeliness
Maintaining consistent communication and timely payments is critical for borrowers facing financial difficulties. Lenders highly value proactive communication regarding the borrower's financial situation, especially when payments are delayed. If a borrower knows they will miss a payment, it is essential to inform the lender and maintain frequent updates. This open line of communication can often lead to more lenient terms and prevent the loan from being transferred to a special assets team, which happens when payments are overdue by more than 60 days.
Understanding the 60-Day Red Line
The 60-day rule is crucial for borrowers to understand. Going beyond 60 days without a payment can trigger serious consequences, including default letters, asset appraisals, and potential liquidation processes initiated by the Small Business Administration (SBA). Consistently missing payments every 60 days without communicating with the lender can quickly lead to loan fatigue, where the lender loses patience and escalates the matter.
90 Days Missed Payments Equals Default and Action
If the 90 days of missed payments happens, then a redline is breached and the rest of this guide is dealing primarily with that scenario.
Strategies for Managing Payment Delays
Borrowers can manage their financial troubles effectively by ensuring that they don't exceed a 30-day lateness mark as it demonstrates responsibility and effort to the lender. Maintaining payments under 60 days late and regularly communicating with the lender can earn forgiveness and prevent severe actions. Even if consistently 30 days late, regular updates to the lender can help maintain a working relationship and reduce the chances of the loan being flagged for special asset management.
SBA Typically Doesn't Guarantee Non-Monetary Defaults
In dealing with SBA-backed loans, ensuring no missed payments beyond 60 days is critical as it can keep the SBA guarantee intact. The SBA usually will not honor a non-monetary guarantee to the lender, meaning that if the lender goes full default collection mode on you for any other reason than missed payments beyond 60 days, then the SBA won't honor the 75% SBA guarantee that the lender based the approval of the loan on in the first place. Proactive communication and timely payments are thus essential in protecting your business and averting severe financial repercussions.
There are no prepay penalties for a standard ten year term SBA loan. However, for loans with a maturity of 15 years or longer, prepayment penalties apply when: The borrower voluntarily prepays 25 percent or more of the outstanding balance of the loan OR when the prepayment is made within the first three years after the date of the first disbursement of the loan proceeds.
The prepayment fee is:
- During the first year after disbursement, 5% of the amount of the prepayment.
- During the second year after disbursement, 3% of the amount of the prepayment.
- During the third year after disbursement, 1% of the amount of the prepayment. description

LoanBox Lenders

LoanBox lenders are not just any lenders; they are hand-picked based on their experience, rankings, analytics, and our vetting process.
Our preferred lenders on our platform range from national powerhouses to regional banks, industry niche focus banks, community banks and credit unions, each bringing its unique strengths to the table. They are all ready and eager to compete for your franchise loans, whether they're local or nationwide.
National Lenders - Our portal hosts many of the top national SBA lenders, including those ranked #1 for the number of SBA loans, dollars funded, and franchise lending.
Industry Lenders - Every industry has its unique set of top-ranked lenders. Lenders who join LoanBox portal system specializing in your franchise brand’s industry will see your franchise profile as a suggested franchise and be able to trigger a request to be a preferred lender on your portal.
Local Lenders - We’ve also sought out top local SBA lenders and top ranked state lenders who offer a local lending option to your franchisees. These banks might not be a national solution separately but together they are an army or lenders.
Depending on the franchise there may be a handful or multiple handfuls of local lenders populating for a specific state. These lenders have reviewed key elements pulled from the brand’s FDD and the SBADNA Analytics we provided them on the average loan size, type, industry, competitor brands, and your SBA lending rankings, statistics, and other analytics.
Each lender pre-populated on your portal has selected the types of borrowers, loan purposes, amount tiers, total loan exposure, and other filters for lending to franchisees of your brand. If a lender's focus or criteria changes and they no longer wish to be a preferred lender for your brand, they can disengage from your brand’s portal with a click of a button.
The lenders portal system helps to ensure each franchise brand’s portal has not only as many top ranked national SBA lenders as possible but also the niche industry focused lenders, conventional term lenders, and top community banks and credit unions who are local to the borrower or the project.
Based on the borrower and project state, the franchisee will see the local lenders (who have vetted your brand and ready to lend) auto-populate along side the national powerhouses.
Do SBA lenders also provide conventional loans?
Yes, most SBA lenders primarily provide conventional loans to local businesses which they supplement with SBA lending. Many lenders will provide SBA loans on a national or regional basis and conventional loans to business customers locally. Some banks are industry niche specialists and will extend conventional lending beyond local businesses and target a specific niche regionally or nationwide.
The same SBA lender providing an SBA loan to purchase commercial real estate may also provide the loan conventionally if it were in the bank’s same city or area.
Then there are banks whose national reach for conventional lending has been dominant but who are now growing complementary SBA programs.
First, The Bank Selects Franchise Brands
Banks select the franchise brands they want to be shown for. We help banks with franchise brand selection due diligence with our analytic reports to give an indication of how the brand performs in SBA lending. It's easy for a bank to select and de-select franchise brands their bank will show for in real-time.
Second, The Bank Selects Industries
Banks select the industries they want to be shown for, and those they don't. We help banks with industry selection due diligence with our analytic reports to give an indication of how the industry performs in SBA lending. It's easy for a bank to select and de-select industries their bank will show for in real-time.
Third, The Bank Selects Geography, Borrower Types, Loan Purposes, and Qualifying Criteria
Borrowers complete detailed questionnaires and upload documents to create their loan packages. These packages are then matched against the qualifying criteria of each portal lender, including loan purpose, amount tier, state, credit score, estimated DSCR, and other criteria. Borrowers only see the lender results that their loan package meets all base criteria for. Borrowers can select which lenders (often opting for all) they wish to grant access to their loan packages.
The Bank Reviews Loan Packages, Provides Loan Proposals
Lenders receive app and email alerts about loan packages ready for review. By accessing the Dashboard, lenders can open the borrower's loan package box to review details and download attachments. They can then submit loan proposals after thorough checking and editing. Borrowers are notified by app and email alerts about new proposals awaiting review. Multiple proposals can be reviewed in a uniform format, with the PDFs showcasing the respective bank's logo at the top.
Once borrowers select a winning lender—often one of the first two proposals—they can accept and e-sign the proposal. Lenders are then alerted about the executed loan proposal via app and email notifications. By navigating to the Dashboard, lenders can view the borrower's profile box under "Accepted Loan Proposals," accessing digital and PDF versions of the digitally signed loan proposal on their letterhead.

LoanBox Venders

LoanBox seamlessly matches vendors, and borrowers based on a variety of factors. For vendors when a business applies for a large partner buyout loan, numerous vendors are required to ensure the deal's successful closure. Essential elements such as purchase agreements, valuations, life insurance assignments, and legal advisors are all part of the mix. Similarly, starting a franchise involves working with an even broader set of vendors. When borrowers complete their loan package to receive proposals, they also view a list of necessary vendors and our suggested choices. Borrowers can access extensive vendor information, from contact details to service descriptions, facilitating a direct and transparent dialogue between the advisor and vendor.
Depending on the type of borrower and type of loan (acquisition, startup, expansion, debt refi, etc.) and location (state and city), the platform matches the vendor types needed with the borrowers' completed loan package. When the borrower completes their loan package to receive loan proposals, they also see the vendor types they will need and the recommended vendors to consider using. The borrower can see the vendor contact information, click to see a description, and then open the vendor page if they want to learn more. They can contact the vendor directly, and any sales transactions are conducted directly between the business and the vendor.
There are numerous types of vendors applicable to the portal since lending for startups, acquisitions, and commercial real estate touches many different industries and vendor types. Contractors, attorneys, credit card processing, life and business insurance agents, escrow agents, business valuation firms, buy side and sell side acquisition consultants, appraisers, financial advisors, estate advisors, tax advisors, CPAs, contractors, and a host of other B2B service vendors are some of the key vendor types on the vendor portal.
How It Works for the Vendor
The vendor completes a vendor profile form, and these inputs are matched with the borrower inputs so when the borrower is finished entering their information, the exact grouping of preferred vendors they need populates onto their dashboard for easy and instant access.
As a vendor, you have your own app which connects to other apps on our portal platform.
Your vendor app is used to:
1. Control your information like contact details, content, and images shared about your business. We have a host of checkboxes to click that helps match you to the business needing your services.
2. Control the target filters of the businesses you are able to help with your products and/or services.
We have filters including:
1. Business age filter
2. Loan Program Filter
3. Loan Purpose Filter
4. Industry Description
5. Project State and County Filter
Our platform knows your vendor profile and exactly the products and services you offer, where you offer them, and to which different types of advisors using our system you offer them. The platform then connects our business borrowers to the matching vendors. We don’t take a commission and vendors don’t pay a fee to be on the platform, so client leads should receive the best price and service.

For Franchisees

Which franchise brands are on this portal?
We have lending activity analytics on thousands of brands. Just over a thousand are high value brands to our preferred lender network. We track the big brands whose franchisees are utilizing SBA lending and conventional bank loans.
We monitor for new and emerging franchises that come onto the franchise lending scene. Select the franchise brand you’re a franchise of or are targeting as a startup franchise with.
LoanBox monitors the SBA lending activity on about 2,000 franchise brands. LoanBox lenders use this intel to manage the franchise brands and franchise types they are targeting through LoanBox. When a franchise selects the franchise brand, they only receive loan proposals from lenders who are already familiar and eager to lend to that brand.
If your franchise brand has been actively involved in small business lending, you'll be able to find the brand on the dropdown search.
For newer franchises or those still unfamiliar within the small business lending world, LoanBox assists in gathering the necessary lenders and vendors to support new or expanding franchisors.
What if my franchise brand doesn't pull up?
If your franchise brand does not pull up on our portal then it means at this time we do not have preferred lenders who have vetted your brand. Contact LoanBox and we’ll find the right lender for you based on your qualifications and expedite adding your brand to the portal for any other franchisees in the future.
Free for loans over $250K & $2500 if not
All LoanBox services are FREE for loans $250K and over. For loans under $250K there is a $2,500 fee added to your loan when it funds (no out of pocket expense and no cost if your loan doesn’t close).
Some franchisors have different arrangements with LoanBox which may reduce or eliminate costs for loans under $250K.
SBA Loan Limits: A Boon for Multi-Brand Expansion
More franchise operators are moving beyond single-brand ownership. The future of franchising is boldly multi-colored, with experienced operators venturing beyond familiar horizons to build cross-brand empires.
For ambitious franchisees seeking to diversify their portfolios through cross-brand acquisitions, the SBA loan program holds a hidden gem: per-subsector loan limits. This seemingly technical detail unlocks significant funding potential, transforming from a bureaucratic constraint to a powerful enabler for multi-brand growth.
Breaking the Chains of Single-Brand Limits:
Traditionally, SBA loans capped borrowing at a maximum of $5 million, but now this maximum is based upon the subsector. This means that a franchisee, operating within different subsectors, can have multiple $5 million maximums per subsector SBA debt, effectively multiplying their borrowing capacity.
Consider a seasoned operator with a successful restaurant franchises who wants to diversify. They can secure an SBA loan for a fitness franchise acquisition in the health and wellness subsector. Tap into another loan to acquire a convenience store in the retail trade subsector.
Suddenly, the single-brand limit becomes irrelevant for at least initial expansion SBA loans, replaced by a flexible tool for strategic diversification. This opens a world of possibilities, allowing franchisees to:
Spread risk across diverse sectors: Mitigate dependence on any single brand by building resilience across complementary or contrasting industries.
Capitalize on emerging trends: Seize opportunities in high-growth subsectors, propelling their overall portfolio forward.
Accelerate expansion plans: Fuel faster and more sustainable growth by acquiring multiple brands in strategic markets.
What if I haven't been awarded a franchise yet?
You can use the LoanBox app even if you are still in the preliminary stages with the franchisor but want to organize your financing and have some loan proposals ready. Simply select the franchise brand you are targeting and follow the outlined process.
With LoanBox you don't have to try to figure everything out on your own when it comes to securing bank financing. LoanBox has the exact banks who have the highest probability of being the perfect lender for your loan. LoanBox is about to save you a lot of time, money and stress.
Each bank has different types of franchise borrower and loan types they are targeting. It may not surprise you that each lender also has a different set of combination of geography, policies, qualifying criteria, and timelines. LoanBox figures all of this out for you.
LoanBox algorithms match your inputs and loan package with dozens of the banks criteria points to show which Your brand's preferred lenders are a match for your specific loan. There might be 25 banks ready to lend to a your franchise brand but only 3 banks your specific loan and situation would get approved with. LoanBox does this advance work for you. This saves so much time, trial and error, and stress and frustration.
When you see the banks you match 100% with you can select one or all to access your loan package and provide a loan proposal. Since the banks know LoanBox borrowers match 100% of their criteria for your franchise brand, they are quick to jump on your file and try to win your loan.
You can accept the first proposal you receive or wait a day or so and compare side-by-side. All of the lenders on LoanBox are there by invitation only, vetted, experienced lenders who have a top ranking in one of our lending analytics tracking categories. All banks, loan packages and loan proposals are shared within the secure LoanBox platform. That is, all lenders access the same loan package within LoanBox instead of your package going outside of LoanBox to multiple lenders.
Select the winning lender and work with direct. Continue with the direct messaging feature and receive process alerts. LoanBox has a robust learning center on small business and franchise lending to access and human support available if you need help. Or, you can have a LoanBox Advisor navigate this whole process for you.

For Franchisors

REPLACE YOUR LOAN BROKER WITH LOANBOX
Empowering Franchisors to Break Free from Third-Party Loan Brokers
For growing franchisors, it can become a task to find the right lenders, and enough of them to assist all of their different franchisees’ different financing needs in different states. Most franchisors aren’t able or even want to have full time staff dedicated to assisting their franchisees with financing. Other franchisors do want to help and often refer their franchisees to third party loan brokers, ROBS providers, or a bank or two they know who have financed other franchisees.
Franchisors rarely have a sense of where their different franchisees are in real time in their varying loan process stages. While franchisors are selling new franchisees in part on the franchisor’s system, most franchisors don’t offer their franchisees a system for financing new franchises.
If you’re a franchisor and this sounds generally like you, then consider LoanBox free loan platform system.
LoanBox empowers franchisors to break free from the dependence on third-party loan brokers and packagers. They can share the LoanBox app with their franchisees or fully customize and white label it for a more personalized experience. Once activated, LoanBox operates automatically. By taking control of their franchise lending system, franchisors can streamline operations, boost franchisee satisfaction, and drive the growth and success of their franchise network—all with minimal effort and no cost for basic app customization.
Streamlining the Process:
LoanBox serves as an efficient and independent loan packaging system and process management platform. Acting as an intermediary, it helps franchisors connect with a reliable pool of franchise lenders who have already evaluated their franchise brand and are eager to provide loans to qualified franchisees. By removing the reliance on third-party intermediaries, franchisors gain more control over the lending process.
Personalization and Customization:
LoanBox offers franchisors the flexibility to personalize and customize the platform to reflect their brand, personality and culture. Franchisors can integrate the portal into their website or offer it as a downloadable app. The portal's appearance, including color schemes, font families, and content, can be tailored to match the franchisor's branding requirements. This personalized approach creates a seamless experience for franchisees and establishes trust and familiarity within the lending process.
Diversity of Lender Types:
One of the advantages of LoanBox is that it expands the range of top ranked lender options available to a franchise's specific loan need and situation. Franchisors can connect and interconnect with various lenders, including non-SBA lenders aspiring to become preferred lenders for your brand. This diversification enables franchises to explore different loan terms, rates, and packages, fostering competition and ensuring the best financing options for their franchisees.
Support and Assistance:
In addition to facilitating direct connections with the right filtered lenders based on the loan package LoanBox also provides reliable support to franchisees. Through features such as an AI ChatBot, guides, FAQs, and human loan advisors, franchisees can receive assistance throughout the loan application and approval process. This support network ensures that franchisees have the necessary guidance and resources to navigate the lending landscape successfully.
Franchisors can fully customize their franchise-branded LoanBoxes to meet their unique lending and support requirements. The LoanBox Franchise Platform elevates and simplifies the management of personalized financing solutions for both franchisors and franchisees. By working closely with franchisors, LoanBox ensures that the app includes the specific loan types, preferred lenders, essential vendors, and other necessary materials.
Additionally, the platform allows for the customization of FAQs, guides, and AI Chatbot content, providing a comprehensive and cohesive support system tailored to each brand's specifications.
A Tailored Lending System for Franchisors
Franchisors inherently understand the power of a well-designed system, as it forms the backbone of their franchise business. Similarly, when franchisors provide their franchisees access to LoanBox, they offer a valuable platform that simplifies and systematizes the loan journey for their franchisees. In doing so, franchisors make the financing aspect of their startup franchises more efficient while simultaneously fulfilling the franchisees' desire for a supportive and systematized approach.
Appreciation for Simplifying Complexity
Franchisees invest in a franchise because they see the value in buying into a proven system. They appreciate the fact that franchisors have already figured out the operational intricacies, providing a ready-made roadmap for success. In the same vein, when franchisees encounter the complexities of securing an SBA loan, they naturally seek a systematic solution. LoanBox answers this need by simplifying the loan process, saving franchisees from the burden of navigating the complexities themselves. By providing this value-added system, franchisors reinforce their commitment to franchisee success and are appreciated for streamlining an otherwise overwhelming task.
Consistency in Brand Experience
Maintaining a consistent brand experience is paramount for franchisors, as it ensures the replication of their successful business model across multiple locations. In extending the LoanBox app as a system, franchisors further enhance a consistent brand experience. The app's design, branded for the franchise, creates a familiar and cohesive experience for franchisees. This continuity in the lending process reinforces the franchisee's confidence in the brand, highlighting the franchisor's commitment to providing a comprehensive system that supports the franchisee during the crucial and stressful step of franchise financing.
Savings in Time and Energy
Just as franchisees seek systems that save them time and energy in managing day-to-day operations, LoanBox delivers similar benefits in the loan process. Franchisees appreciate not having to spend countless hours researching, contacting multiple banks and brokers, or deciphering generic loan information from the internet. The LoanBox app consolidates resources, provides accurate and specific knowledge, and offers a centralized platform. This time-saving convenience aligns with the principles of a well-structured system, reinforcing the projection of the franchisor's commitment to optimizing the franchisee's success.
LoanBox embodies the system-centric values that franchisors and franchisees inherently appreciate and seek. By providing a value-added solution that simplifies the loan process and removes much of the stress factor from the equation, franchisors enhance their credibility with loan-seeking franchisees, reinforce brand consistency, and demonstrate their commitment to franchisee success. Franchisees, in turn, appreciate the support and systematized approach, aligning their journey with the principles they bought into when they invested in the franchisor's brand concept. LoanBox becomes a natural extension of financing the dream the franchisor is selling and the franchisee is going into debt to invest in.
Customization and White Labeling with LoanBox
Success in franchising hinges on uniformity, brand recognition, and a seamless experience for both franchisors and franchisees. At the heart of LoanBox's offerings is the ability to extensively customize and white label the platform, allowing franchisors to infuse their unique brand identity. This article explores how franchisors can tailor and white label LoanBox to match their brand vision, boosting recognition, building trust, and accelerating the growth of their franchise network.
Branding and Design
LoanBox empowers franchisors to customize the platform's branding and design elements, ensuring a cohesive visual experience that aligns with their franchise brand. By integrating their logo, color schemes, and typography, franchisors can create a seamless interface for franchisees. This consistent branding enhances franchisee confidence and underscores the franchise network's unique identity.
Content Customization
Franchisors can tailor the content within LoanBox to meet their specific network needs. Whether it’s instructional materials, training modules, or loan documentation, franchisors can upload and modify content to provide franchisees with precise, brand-specific resources. This ensures franchisees have access to relevant, up-to-date information, fostering unity and support within the franchise network.
Customizable Automation and Alerts
LoanBox offers flexibility in automating processes and managing alerts according to franchisor preferences. Franchisors can customize automation workflows to streamline tasks and automate notifications for crucial events or milestones. This capability enhances efficiency and ensures timely communication within the network, aligning the platform's automation features with unique franchise operations.
White Labeling
LoanBox also provides white labeling options, allowing franchisors to brand the platform as their own. By incorporating their franchise’s name and logo, franchisors create a fully integrated experience for franchisees. This white labeling feature strengthens the franchise brand's credibility, reinforces trust, and enhances the network's overall professionalism.
Tailored Analytics
LoanBox's analytics capabilities can be customized to highlight the most relevant metrics and insights for franchisors. They can define key performance indicators (KPIs) that align with their franchise goals. Customizing analytics helps franchisors glean actionable insights, facilitating informed decision-making, optimizing operations, and promoting sustainable growth within their franchise network.
Enhancing Franchisor-Franchisee Synergy
Franchisors inherently understand the power of a well-designed system, as it forms the backbone of their franchise business. Similarly, when franchisors provide their franchisees access to LoanBox, they offer a valuable system that simplifies the loan journey. In doing so, franchisors reinforce the value of a tailored system to make things easier, efficient, and more successful.
Franchisees don’t want to try to figure everything out on their own regarding getting the financing needed. Franchisees generally prefer a supportive and systematized approach when it comes to getting financed to open or purchase a franchise. Just ask them.
For many of your franchisees, securing a franchise loan can often seem like navigating through a complex maze. The process can be laborious, fraught with extensive research, numerous bank conversations, broker interactions, and the uphill battle against misleading internet information.
LoanBox acts as a central hub for all lending resources, effectively putting an end to the tedious task of information hunting on the web. It provides accurate, brand-specific loan information. The lending process is significantly simplified by the platform. By offering a pre-filled lender's portal, direct lender connections, and on-demand human expert support, the platform minimizes confusion and ensures a frictionless loan application and approval process.
Appreciation for Simplifying Complexity
Franchisees invest in a franchise because they see the value in buying into a proven system. They appreciate the fact that franchisors have already figured out the operational intricacies, providing a ready-made roadmap for success. In the same vein, when franchisees encounter the complexities of securing an SBA or conventional bank loan, they naturally seek a systematic solution. LoanBox answers this need by simplifying the loan process, saving franchisees from the burden of navigating the complexities themselves. By providing this value-added system, franchisors reinforce their commitment to franchisee success and are appreciated for streamlining an otherwise difficult and time-consuming task.
Consistency in Brand Experience
Maintaining a consistent brand experience is paramount for franchisors, as it ensures the replication of their successful business model across multiple locations. In extending LoanBox as a system, franchisors further enhance this consistency. The platform's design, branded for the franchise, creates a familiar and cohesive experience for franchisees. This continuity in the lending process reinforces the franchisee's confidence in the brand, highlighting the franchisor's attention to detail and commitment to providing a comprehensive system that supports the franchisee at every step.
Savings in Time and Energy
Just as franchisees seek systems that save them time and energy in managing day-to-day operations, LoanBox delivers similar benefits in the loan process. Franchisees appreciate not having to spend unpleasant hours researching, contacting multiple banks and brokers, or deciphering generic loan information from the internet. LoanBox consolidates resources, provides accurate and specific knowledge, and offers a centralized platform. This time-saving convenience aligns with the principles of a well-structured system, demonstrating the franchisor's commitment to optimizing the franchisee's success.
Strengthening Franchisee-Franchisor Alignment
Franchisees' decision to invest in a franchise goes beyond the financial aspect; they also seek a sense of partnership and alignment with the franchisor. By offering LoanBox, franchisors showcase their dedication to meeting franchisees' needs and providing them with the necessary tools for success. This alignment is particularly evident when franchisees apply for an SBA loan to fund their investment in the franchisor's brand concept. The platform becomes an extension of the franchisor's system, fostering a stronger initial bond and setting the stage for a collaborative and prosperous partnership.
It’s a WIN-WIN-WIN
LoanBox embodies the system-centric values that franchisors and franchisees inherently appreciate and seek. By providing a value-added solution that simplifies the loan process, franchisors enhance their offering, reinforce brand consistency, and demonstrate their commitment to franchisee success.
Franchisees, in turn, appreciate the support and systematized approach, aligning their journey with the principles they bought into when they invested in the franchisor's brand concept.
Managing, Monitoring, and Automating Franchise System Lending with LoanBox
LoanBox offers franchisors the capability to manage, monitor, and automate franchise system lending. This flexibility caters to different management styles, allowing some franchisors to actively oversee each franchise loan while others might prefer a more hands-off approach. With LoanBox, custom automations can be set up easily, and the LoanBox team handles the entire setup. LoanBox offers real-time visibility into loan statuses, providing essential metrics such as the number of active loans, loan amounts and rates, pending loans, and details of the lenders handling each loan. This transparency grants franchisors enhanced control and insight into every step of the loan process.
Loan Process Automation
LoanBox enables franchisors to either micromanage every aspect of the loan process or to set it on autopilot. Automated updates and a detailed pipeline report keep franchisors informed at all times, allowing SBA professionals to manage the system while franchisors intervene only when necessary. Inactivity and caution alerts can be configured to prompt franchisors when specific actions are required, ensuring all details are covered.
Real-Time Loan Alert System
A significant feature of LoanBox automation is its real-time alert system. Franchisors can customize their preferences to receive numerous update alerts or opt for fewer updates with periodic pipeline reports. Alerts tailored to franchisors' specific needs help in managing the process efficiently.
Loan Stage & Process Alerts
Email notifications and dashboard posts alert franchisors at various stages within the loan process. These alerts may include:
- Franchise downloads the app
- Completion and sharing of the loan package
- Receipt and acceptance of loan proposals
- Credit pulls and underwriting steps
- Scheduled calls and meetings
- Approval reviews and committee dates
- Issuance and execution of commitment letters
- Loan funding and post-loan survey completion
Loan Inactivity & Caution Alerts
Inactivity and caution status alerts help franchisors stay informed about loan processes. Alerts are issued if there is no activity for a set number of days or if issues arise, such as appraisal or valuation problems.
Examples include:
- No activity posted in the last 7 days
- Potential dormancy with process stage on hold
- Funding deadline at risk due to missing documents
- Potential issues with appraisal, valuation, or deal structure
- Unexpected credit score results
- Analyst concerns or general contractor checklist delays
Kanban Pipeline Status Report
The Kanban Pipeline Status Report provides a clear visual of each franchise's loan process stage. Alerts are sent when stages are updated by the lender or borrower. The downloadable pipeline report, available in Excel or CSV format, offers comprehensive data for further analysis and integration into CRM systems. This feature ensures franchisors have all necessary information to manage and track franchise loan status efficiently.
Centralized Vendor Database
The Vendors Portal serves as a comprehensive hub where franchisors can create and manage a detailed database of their vendors. This includes essential information such as contact details, payment terms, products and services offered, and contractual obligations. This centralized repository ensures easy access to all necessary information, eliminating the need for time-consuming searches across multiple platforms.
Efficient Vendor Onboarding
The Vendors Portal streamlines the vendor onboarding process, reducing the administrative burden on franchisors. It allows franchisors to create customizable vendor registration forms within the portal, systematically collecting all necessary information from potential vendors. This ensures a smooth integration of vendors into the franchise system and consistency in data collection.
Streamlined Communication
The Vendors Portal facilitates effortless communication between franchisors and vendors. It enables the exchange of messages, submission of queries, and requests for quotations directly on the portal, eliminating the need for disorganized email threads or phone calls. This efficient communication system minimizes miscommunication and strengthens relationships between franchisors and vendors.

Guaranties

Each loan necessitates at least one guarantor, whether individual or corporate. Should there be no individual or entity holding a minimum of 20% ownership in the applicant entity, at least one of the owners is mandated to provide an unconditional, full guarantee.
Individual Guarantees: Owners who hold a 20% or greater stake in an applicant entity are obligated to provide a full, unrestricted guarantee. In cases where the applicant's ownership is vested in a corporate entity, partnership, or any other legal entity, full disclosure of every individual's ownership interest is mandatory. Depending on the credit or other relevant factors, additional individuals or entities might be required to provide full or limited guarantees for the loan, irrespective of their ownership percentages. For all loan guarantors, the SBA lender must procure a personal financial statement, with an exception for 7(a) loans and 504 projects less than or equal to $500,000.
Spousal Guarantee: In cases where a spouse owns less than 20% of an applicant entity, a full personal guarantee is mandatory when the combined ownership stake of both spouses and their minor children equates to or exceeds 20%. Non-owner spouses are required to sign the appropriate collateral documents. The guarantee of the spouse, secured by jointly held collateral, will be limited to the spouse's interest in said collateral.
Corporate, Trust, & Other Guarantees: All entities with a minimum 20% ownership in an applicant entity are required to provide a full, unrestricted guarantee. If the owner is a trust (revocable or irrevocable), the trust should guarantee the loan, with the trustee signing the guarantee on behalf of the trust and providing required certifications. If the trust is revocable, the Trustor must also guarantee the loan.
Change of ownership: Any individual who was subject to the guarantee requirements half a year prior to the date of the loan application is still required to comply with these requirements, even if they have reduced their ownership stake to less than 20%. The only exception applies when the individual has completely divested of their interest before the application date. Complete divestiture involves relinquishing all ownership stakes and severing all relations with the applicant (and any affiliated Eligible Passive Company), including employment (whether paid or unpaid).
Supplemental Guarantor: This is a person or entity mandated by a Lender to provide a guarantee due to prudence and is not required by SBA Loan Program Requirements to provide a guarantee.
Can an owner reduce equity to avoid guaranty?
Any individual who was subject to the guarantee requirements half a year prior to the date of the loan application is still required to comply with these requirements, even if they have reduced their ownership stake to less than 20%. The only exception applies when the individual has completely divested of their interest before the application date. Complete divestiture involves relinquishing all ownership stakes and severing all relations with the applicant (and any affiliated Eligible Passive Company), including employment (whether paid or unpaid).
Spousal Guaranty Requirements for SBA Loans
The new SBA SOP has broadened the scenarios under which a spouse may be required to act as a guarantor. Here are some examples:
- Spousal Guaranty Rule: For SBA loans, if a spouse of an owner owns any percentage, and the spouse equity and the owner equity combined equals 20% or more, the spouse also has to be a guarantor. So, if an owner has 19% equity and their spouse has 1% equity then both must be guarantors.
- Community Property or Spousal Interest in Property: If a spouse has a community property or spousal interest in property that is pledged to secure an SBA loan, they may need to guarantee the loan. This requirement is due to community property laws which give spouses an equal ownership interest in property acquired during marriage and spousal interests that allow spouses to inherit property from each other.
- Significant Influence Over Business Operations: A spouse may be required to be a guarantor if they exert significant influence over the business's operations, even without a direct ownership interest in the business. For instance, if the spouse manages the business's finances or makes major decisions for the business, the SBA may consider them a de facto owner and require a guaranty.
- Prior Bankruptcy or Credit Issues: If the spouse has a history of bankruptcy or credit problems, the SBA may require a guaranty. This is because SBA considers a spouse's creditworthiness when evaluating the overall risk of the loan. If the spouse's credit history indicates higher risk of default, the SBA may require their guaranty to mitigate that risk.
- Limited or No Community Property Laws: In certain states with limited or no community property laws, spouses may still be required to be guarantors if they have a significant financial interest in the business or have contributed to the business's success in some way. For example, if a spouse has invested personal funds into the business or provided valuable labor or expertise, the SBA may require their guaranty.
- Boarderline Approval Scenario: For less established borrowers whose loan is borderline for approval, a spouse who generates income can be added as a guarantor to help push the loan over the approval line with the lender.
- Supplemental Guarantor: Updated Definitions: Added language indicates that a non-owner spouse required to provide a limited guaranty to secure a lien on jointly owned personal real estate is not a Supplemental Guarantor. This clarification is important as such a guaranty is mandatory, and Supplemental Guarantors are typically only required for voluntary guarantees.
For instance, if a business owner is obtaining an SBA loan to finance the purchase of a portion of their business partner's ownership stake, and the business owner's spouse is required to provide a limited guaranty to secure a lien on the couple's jointly owned home, the spouse is not considered a Supplemental Guarantor. This distinction is significant because Supplemental Guarantors are typically subject to stricter eligibility requirements and may be required to provide a personal financial statement.
Substitution of Personal and/or Corporate Guaranty Liability
SBA loan policy now allows the ability for borrowers to substitute personal and/or corporate guaranty liability under certain conditions.
Substitution Allowed: With SBA approval, borrowers can now replace existing personal and/or corporate guarantors with qualified substitutes. This potentially offers greater flexibility for borrowers facing changes in business ownership or personal circumstances.
- Conditions: Approval for substitution is contingent on several factors, including the good standing of the loan, the financial strength and eligibility of the proposed substitute guarantor, and the absence of adverse impact on the SBA's financial interests.
- Original Guarantor Liability: The original guarantor may still be liable for certain obligations incurred before the substitution is approved.
Late Loan Payment Management
When facing distressed loans, ensuring timely payments is pivotal to maintaining a stable financial standing, especially for independent business owners. If you foresee financial trouble for an extended period—say, a year—it's imperative to communicate openly with your lender. Short-term solutions like a three or six-month forbearance can provide immediate relief, but consistently delaying payments beyond 60 days can raise significant red flags with your financial institution. Prolonging overdue payments can fatigue lenders and negatively impact consumer credit numbers, making it a less viable long-term strategy.
Communication and Payment Timeliness
Maintaining consistent communication and timely payments is critical for borrowers facing financial difficulties. Lenders highly value proactive communication regarding the borrower's financial situation, especially when payments are delayed. If a borrower knows they will miss a payment, it is essential to inform the lender and maintain frequent updates. This open line of communication can often lead to more lenient terms and prevent the loan from being transferred to a special assets team, which happens when payments are overdue by more than 60 days.
Understanding the 60-Day Red Line
The 60-day rule is crucial for borrowers to understand. Going beyond 60 days without a payment can trigger serious consequences, including default letters, asset appraisals, and potential liquidation processes initiated by the Small Business Administration (SBA). Consistently missing payments every 60 days without communicating with the lender can quickly lead to loan fatigue, where the lender loses patience and escalates the matter.
90 Days Missed Payments Equals Default and Action
If the 90 days of missed payments happens, then a redline is breached and the rest of this guide is dealing primarily with that scenario.
Strategies for Managing Payment Delays
Borrowers can manage their financial troubles effectively by ensuring that they don't exceed a 30-day lateness mark as it demonstrates responsibility and effort to the lender. Maintaining payments under 60 days late and regularly communicating with the lender can earn forgiveness and prevent severe actions. Even if consistently 30 days late, regular updates to the lender can help maintain a working relationship and reduce the chances of the loan being flagged for special asset management.
SBA Typically Doesn't Guarantee Non-Monetary Defaults
In dealing with SBA-backed loans, ensuring no missed payments beyond 60 days is critical as it can keep the SBA guarantee intact. The SBA usually will not honor a non-monetary guarantee to the lender, meaning that if the lender goes full default collection mode on you for any other reason than missed payments beyond 60 days, then the SBA won't honor the 75% SBA guarantee that the lender based the approval of the loan on in the first place. Proactive communication and timely payments are thus essential in protecting your business and averting severe financial repercussions.

Collateral

What are the SBA collateral requirements?
An SBA loan request is never declined solely on the basis of inadequate collateral. In fact, one of the primary reasons lenders use the SBA program is for those applicants that demonstrate repayment ability but lack adequate collateral to repay the loan in full in the event of default.
The SBA has clearly defined loan property lien requirements. For loans over $500,000 the SBA requires that a lien be placed on available equity of the borrowers personal real estate including residential and investment property if the equity is 25% or more of fair market value.
The SBA does not require lenders to collateralize a loan with personal property if the borrower has less than 25% equity of fair market value. Real estate is valued at 85% of the market value for purposes of the calculation of fully-secured.
SBA does not require a lender to collateralize a loan with a personal real estate to meet the fully secured definition when the equity in the real estate is less than 25% of the property’s fair market value. However, an SBA lender is not prohibited from doing so.
Loans under $500K no personal property, over $500K and 25% equity then…
The SBA does not require borrowers to have equity in a house/property to qualify, but if the borrower does have such equity an SBA lender may have to use it for collateral if certain conditions exist.
The SBA does not require lenders to collateralize the loan with personal property if the borrower has less than 25% equity of fair market value. It is an SBA requirement that for loans over $500,000 if you have 25% equity in any personal real estate, including residential and investment property, that it be required as collateral, up to the full loan amount.
If a borrower is considering an SBA loan for more than $500,000 and has 25% or more equity in their home then getting a HELOC in place can bring the equity available to under 25% and therefore avoid a junior lien being placed on their home by the SBA lender.
Will a HELOC help me avoid using my house as collateral for a loan?
Any amount taken out in a Home Equity Line Of Credit is deducted from the 25% equity rule. If the property with a HELOC is being collateralized, then the SBA lender would be in third lien position, with the mortgage in first, and the HELOC in second.
How would house lien impact ability for future HELOC?
You can refinance a collateralized house but no cash out refis are allowed. While you can keep any existing HELOC in place, you would not be able to get a new HELOC after the SBA loan is funded.
What happens if I sell a collateralized property?
You would notify the lender of this. The process is that you sell the house and the mortgage lender gets paid off, your equity goes to the bank to be held in escrow, and they release the lien. When you purchase another house/property this amount can be applied to your purchase and the lender will take a lien on the new house/property. If the equity is not applied to another house/property then it has to be applied to the SBA loan balance.
Can I use securities instead of my house if required?
If you are required to use property as collateral then you could instead replace with securities only if the collateral would cover the full amount of the loan. Whole Life Cash Value and Marketable Securities cannot be used in lieu of a residence, unless it fully secures the loan amount.
What is a UCC Lien?
A Uniform Commercial Code (UCC) lien is a legal document that gives a creditor (like a bank) the right to seize and sell certain assets of a debtor (like your business) if the debtor defaults on their loan.
Why will the bank file a UCC lien on my business?
Banks typically file UCC liens on businesses to protect their lending interests. It gives them priority over other creditors if your business goes bankrupt or defaults on multiple loans. Think of it as the bank putting a "claim" on your assets, ensuring they're first in line to get paid if things go south.
What assets can a UCC lien be filed on?
The specific assets covered by the UCC lien will be listed in the document itself. It can include things like:
- Inventory
- Equipment
- Accounts receivable
- Intellectual property (like patents or trademarks)
- Real estate (if you're using it as collateral for the loan)
What does this mean for my business?
Filing a UCC lien won't have a major impact on your day-to-day business operations. You can still use and manage the assets covered by the lien. However, there are a few things to keep in mind:
- You cannot sell or dispose of the assets covered by the lien without the bank's permission.
- If you default on your loan, the bank can seize and sell the assets to recoup their losses.
- The UCC lien will be publicly recorded, which could potentially affect your business credit score.

Qualifying

What are the five Cs of credit?
Credit analysis is governed by the 5 Cs of credit: character, capacity, condition, capital and collateral.
Capacity: The lender wants to know that your business is able to repay the loan. The business should have sufficient cash flow to support its business expenses and debts comfortably while also providing principals salaries sufficient to support personal expenses and debts. Examining the payment history of current loans and expenses is an indicator of the borrower reliability to make loan payments.
Condition: The lender will need to understand the condition of the business, the industry, and the economy, which is why it is important to work with a lender who understands your industry. The lender will want to know if the current conditions of the business will continue, improve or deteriorate. Furthermore, the lender will want to know how the loan proceeds will be used- working capital, renovations, additional equipment, etc.
Capital: Your lender will ask what personal investment you plan to make in the business. Not only does injecting capital decrease the chance of default, but contributing personal assets also indicates that you are willing to take a personal risk for the sake of your business; it shows that you have skin in the game.
Collateral: A lender will consider the value of the business assets and the personal assets of the guarantors as a secondary source of repayment. Collateral is an important consideration, but its significance varies depending on the type of loan. A lender will be able to explain the types of collateral needed for your loan.
Character: Lenders need to know the borrower and guarantors are honest and have integrity. Additionally, the lender needs to be confident the applicant has the background, education, industry knowledge and experience required to successfully operate the business. Lending institutions may require a certain amount of management and/or ownership experience.
What is the minimum credit score?
The SBA does not have a minimum credit score requirement and defers to the SBA lenders standard credit score policy for loans over $500K. SBA lender credit score minimums vary, but 625 is a very low minimum to have and most SBA lenders will require 640 and above.
For loans under $500K the SBA has required lenders to use the SBBS score. However, the SBA now allows for a lender to utilize their own internal scoring system under certain conditions. But most of the time, it will be the SBBS score to contend with for a borrower with a loan to $500K.
SBA borrowers for loans up to $500K will begin with a screening for a FICO® Small Business Scoring ServiceSM Score (SBSS Score). The SBSS Score is calculated based on a combination of consumer credit bureau data, business bureau data, borrower financials, and application data (The SBSS Score is not to be confused with the Small Business Predictive Score (SBPS) used by SBAs Office of Credit Risk Management). The minimum acceptable SBSS score is 155, but that score may be adjusted up or down from time to time.
When is my credit score pulled during the loan application process?
Once the loan proposal is executed.
Why is the credit score pull from the lender different than what I see?
Between all three bureaus, there are multiple FICO® Score versions out there being used. Many SBA lenders are using the TransUnion FICO 4 version but several others are used by different lenders. Many credit reporting services you might be seeing your FICO score use different FICO Score versions. Common versions used are FICO Score 2, FICO Score 5, FICO Score 8, FICO Score 9…you get the picture. The TransUnion FICO 4 version is not a popular version used outside of banks. It is not unusual for the TransUnion FICO 4 version to have a lower score (even up to 40-50 points lower) than more widely used versions. This can make a difference and cause alarm when you think you have a 720 score and then the bank pulls your credit and it is 685.
Is there a difference between my Personal vs. Business Credit Score?
As a small business owner, it is vital to understand the difference between your personal and business credit scores. Personal and business credit score numbers are independent of each other but are often used together to determine your ability to secure a business loan. Let us break down the difference between these two important numbers.
About Personal Credit: Using your Social Security Number (SSN), three different credit reporting bureaus (Equifax, Experian and Transunion) track your personal credit history which is then used by FICO to generate your personal score. The FICO score is based upon several different factors, including your payment history, amount of money owed, length of credit history and types of credit cards used. Developing good habits like paying your bills on time, avoiding maxing out your credit cards, keeping your credit card balances low and keeping credit accounts open for extended lengths to prolong your credit history will all positively affect your personal score.
Personal credit scores can range from 300 to 850. Scores between 800-850 are considered excellent and signify low-risk borrowers, while scores between 740-799 are very good and scores between 670-739 are good. For SBA small business loans, the minimum credit score is 650, but some loans may require a higher score. Overall, the higher your personal credit score, the lower the credit risk you are, and you may receive more favorable loan terms from a bank.
About Business Credit: Your business credit score measures your company’s credit worthiness and offers insight into the financial health of your company. Your business credit score is attached to your Employer Identification Number (EIN) and tracked by the Small Business Financial Exchange. The three main business credit bureaus are Dun & Bradstreet, Equifax and Experian. You must register your business with one of these credit bureaus to establish your business credit, and each bureau determines your score using various factors with different score ranges.
What happens if you have Liens & Judgements?
Public records such as tax liens, judgments, bankruptcies, and foreclosures not reporting on credit report will be discovered through the third party national public records searches banks pay for like Lexis Nexis, Data Verify or other third party public search companies. If there are tax liens and judgments that have been already paid, no real problem. A paid or released tax lien can remain on your credit file for seven years from the date released or ten years from the date filed. Unpaid or unreleased tax liens remain on file for ten years from the file date. Tax liens and judgments that have a current balance and are still outstanding have to be resolved. SBA lenders will not lend with a current tax lien and they also will not lend to pay off a tax lien.
However, the SBA does allow for a federal (not state) tax lien settlement payoff loan as a legitimate loan purpose. If you have an IRS tax lien, have a settlement plan, and have been making your payments on time, the SBA program allows for a loan to pay off the IRS settlement.
What happens if you have prior Prior Bankruptcy?
It is a myth that it is impossible to get an SBA loan with a previous bankruptcy. However, if you declared bankruptcy in the last three years…it is not a myth because it will be nearly impossible to get a lender to sign off on. And, some lenders will simply not lend to anyone with a prior bankruptcy. But there are lenders who will make exceptions or have scenarios that will allow for lending to previous BK borrowers.
Bankruptcy scenarios that can be typically worked around:
• If the BK is older than 10 years for some lenders.
• If the BK is older than 7 years for some lenders.
What happens with your SBA loan application if you have Background Character Issues?
Character is one of the 5 Cs of credit eligibility. The issue of character covers a few different areas including your credit report, credit history, and personal background. These include your management ability and skillset, if there is a criminal record, prior bankruptcy or short sales, multiple or open judgements or liens. The SBA has specific rules on character in their operating procedures that lenders must follow. The SBA requires that not only the borrower pass the character test but that also any general partner, officer, director, managing member of a limited liability company (LLC), owner of 20% or more of the equity of the Applicant, Trustor (if the Applicant is owned by a trust), and any person hired by the Applicant to manage day-to-day operations (Subject Individual) must be of good character.
If a character determination issue arises then the SBA does not allow for the subject individual to reduce his/her ownership in an Applicant within 6 months prior to the date of the application for the purpose of avoiding rule compliance. The only exception to the 6-month rule is when a Subject Individual completely divests his/her interest prior to the date of application. Complete divestiture includes divestiture of all ownership interest and severance of any relationship with the Applicant (and any associated Eligible Passive Company) in any capacity, including being an employee (paid, unpaid, or contracted).
The SBA also prohibits lenders from providing SBA loans to businesses with Associates who are: Incarcerated, on probation, or on parole (an individual with a deferred prosecution, conditional discharge, order of protection, or who is on a sex offender registry is treated as if the individual is on probation or parole). Currently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction.
What happens with your SBA loan application if you have Prior Loss to Government?
The SBA has specific eligibility rules regarding borrowers with a prior loss to the government.
Payment of Delinquent Taxes: Loan proceeds must not be used to pay past-due Federal, state, or local payroll taxes, sales taxes, or similar taxes that are required to be collected by the Applicant and held in trust on behalf of a Federal, state, or local government entity. However, payment of delinquent business income taxes may be permitted if the Applicant has an approved payment arrangement with the IRS and the Applicant is current on the payments in the arrangement.
What if I have had a Prior Loss to Government?
Unless waived by SBA for good cause, an Applicant is not eligible for a 7(a) or 504 loan if there is a prior loss to the Federal government. A Prior Loss has occurred when: The Applicant has previously defaulted on a Federal loan or federally assisted financing, resulting in a loss to the Federal government or any of its agencies or departments. Any other business owned, operated, or controlled by the Applicant or an Associate of the Applicant, previously defaulted on a Federal loan or federally assisted financing (or guaranteed a loan which was defaulted), resulting in a loss to the Federal government or any of its agencies or departments. For purposes of this rule, loss means any deficiency on a Federal loan or federally assisted financing that has been incurred and recognized by a Federal agency after it has concluded its write-off and/or close-out procedures for the particular account and includes any amount compromised for less than the full amount, discharged through bankruptcy, and any unreimbursed advance payment under 8(a) or a similar program operated by a Federal agency. NOTE: Loss does not include unpaid/delinquent taxes or any loss incurred by the Federal Deposit Insurance Corporation (FDIC) when it sells a loan at a discount.
What about prior SBA Loan Defaults?
If a small business defaults on the SBA-guaranteed loan and SBA suffers a loss, the names of the small business, the guarantors of the SBA-guaranteed loan, and any Associate(s) that control the Applicant, get put on SBAs naughty list, which may affect the eligibility of a business owned or controlled by any such individual(s) or entity(ies) for future financial assistance from SBA or other Federal agencies or departments.
What about Delinquent Non-Tax Federal Debt?
Applicant is not eligible for a 7(a) or 504 loan if the Applicant or any guarantor owes an outstanding non-tax debt to the Federal Government, or any agency thereof, that is in delinquent status (hereafter referred to as Delinquent Federal Debt). A non-tax debt owed to the Federal Government includes any amount of money, funds, or property that has been determined by an appropriate official of the Federal Government to be owed to the United States, or an agency thereof, by a person (including an individual, corporation, partnership or other type of entity), including debt administered by a third party as an agent for the Federal Government. A debt is in delinquent status when the debt has not been paid within 90 days of the payment due date. The payment due date is specified in the creditor agency initial written demand for payment or other applicable agreement. A debt is considered delinquent even if the creditor agency has suspended or terminated collection activity with respect to such debt.
Understanding Maximum Loan Amounts with DSCR:
The Debt Service Coverage Ratio (DSCR) and your business's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) play a crucial role in determining your maximum loan amount. Lenders primarily rely on these two financial indicators to assess your ability to repay debt.
Formula: Maximum Debt = EBITDA / DSCR
EBITDA: This is a measure of your business's profitability.
DSCR: This is a measure of your ability to repay debt.
For Existing Franchises and Business Acquisitions:
Lenders primarily base maximum loan amounts on your business's current or combined EBITDA and their minimum DSCR requirement.
Let's consider a business with a combined EBITDA of $500,000. Here's how the maximum debt changes based on different DSCRs:
DSCR 1.15: Maximum Debt = $434,782 (monthly payment: $36,231)
DSCR 1.25: Maximum Debt = $400,000 (monthly payment: $33,333)
DSCR 1.50: Maximum Debt = $333,333 (monthly payment: $27,777)
DSCR 1.75: Maximum Debt = $285,714 (monthly payment: $23,809)
- Higher DSCRs indicate stronger debt repayment ability, which in turn leads to lower maximum debt amounts.
- Lenders often set minimum DSCRs to make sure borrowers can comfortably meet their loan payments.
- Startups rely on projected EBITDA for loan calculations.
How do you calculate Cash Flow and the Debt Service Coverage
The minimum DSC ratio required, when and if a policy exception can be made, and exactly how the DSC is calculated will all vary by lender. Many acquisition deals cash flow high enough that these variances will not make a difference for acquisition loan approval. However, when cash flow is tight and every dollar counts, the lenders minimum DSC requirement can make a difference between qualifying with one lender but not another.
The SBA mandates a 1.15 business DSCR minimum but most SBA lenders will have a higher minimum ranging from 1.25 to 1.75 DSCR. Lenders will calculate DSC for both the acquisition deal and for the borrower personally. Unfortunately the ways cash flow is calculated is not an exact uniform policy across the board with all lenders, even with SBA lenders.
To calculate EBITDA for acquisition loans, the bank will typically take the combined buyer and seller net operating income (earnings) and add to it any interest, income tax, depreciation, and/or amortization expenses. They add the new acquisition loan debt and then look both forward a year and backward a year (often two years) to see if the deal cash flows above their minimum DSCR policy on a projected and historical basis. Sometimes it is not only what the minimum debt service coverage ratio is but also how the DSCR is calculated. Most SBA lenders will go off of EBITDA.
Formula: Annual EBITDA / Annual Debt = DSCR.
For startups this is based on projections. For purchasing a business this is based on the combined profit of the buyer and seller. This ratio is a reflection of available free cash flow after paying all expenses and debt service payments. Example:
Combined buyer and seller EBITDA: $500,000
Loan: $1,000,000 on 10 year term at 6.5% rate = $136,258 annual debt service
EBITDA $500,000 / Annual Debt Service $136,258 = 3.6 DSCR 
Personal Debt and Debt-to-Income
For personal cash flow ratios some lenders will use the same calculation as they do with the business DSC and may or may not have the same minimum ratio, or have a minimum combined (personal and business) which is called a “global” DSC.
- SBA requires a 1.1 personal DSC. Conventional lenders differ on personal cash flow and debt requirements but all of them look at personal as well as business DSC.
  A conventional lender can also look at personal debt to income (Personal Annual Debt Service / Total Personal Income) and require a maximum of 30%-40% debt for example.

Equity Injection

What is an equity injection?
This is basically skin in the game from the lender's perspective for an acquisition loan. The equity injection has nothing to do with an asset or equity purchase, it is referencing equity to mean that either cash or assets are injected into the deal. An equity injection can be provided by the buyer through a cash down payment or waived based on their current book of business value. A seller can inject equity into the deal by providing a seller promissory note for a portion of the purchase price. And equity injections can be satisfied through a combination of buyer down payment and a seller note.
Understanding the New SBA Equity Injection Rules
The SBA equity injection rule stipulates a ten percent equity injection on loans that lead to a change of ownership. This rule applies to the total project costs and not the loan amount. The 10% equity must come from a source outside the business's existing balance sheet.
Change of Ownership Loans
These loans entail acquiring a business, assets, or equity, where the ownership is entirely transferred from the seller to the buyer. These loans include new business purchase loans, expansion business purchase loans, and complete and partial partner buyouts.
In terms of Equity Injection for a Business Purchase, there are three ways to meet the equity injection requirement: 10% Cash, Full Standby Note, and Partial Standby Note. If choosing a Standby Note, the borrower will have two loans: an SBA loan with the lender, and a promissory note with the seller.
For changes of ownership resulting in a new owner (complete change of ownership): At a minimum, SBA requires an equity injection of at least 10 percent of the total project costs, (all costs required to complete the change of ownership, regardless of the source of funds) for such transactions.
Seller debt may not be considered as part of the equity injection unless the seller’s loan does not include a balloon payment and, for the first 24 months of the 7(a) loan, the seller debt is on either (a) full standby; or (b) partial standby (interest payments only being made) and the Applicant’s historical business cash flow supports the ability to make the payments, and at least a quarter of the SBA-required equity injection is from a source other than the seller.
What are change of ownership loans?
A loan resulting in a change of ownership is when you are purchasing a business, assets or equity, whereby 100% of the ownership transfers from the seller to the buyer.
These include:
A new business purchase loan
An expansion business purchase loan
And complete and partial partner buyouts.
Equity Injection
The partial partner buyout is when a borrower is purchasing part of the equity owned by a partner. The partner who is selling will remain on as a partner since they are selling just part, and not all, of their equity.
This loan also requires a ten percent cash injection unless two key requirements are met.
A Maximum Debt-to-Worth of nine-to-one (9:1). This is determined based on the business balance sheet over the most recent year and quarter.
Any remaining owners of the business who have twenty percent or more in equity, are subject to the SBA guarantor requirements. This includes the personal guaranty and the property collateral requirements.
Calculate the 9:1 ratio
The 9:1 ratio for equity injection in SBA SOP for partner buyout loans is a measure of a business's financial health. This ratio compares the business's debt to its equity, which represents the amount of capital invested in the business by its owners. A lower debt-to-equity ratio indicates that the business has more equity and is less reliant on debt, while a higher debt-to-equity ratio suggests that the business is more heavily indebted.
Calculating the 9:1 Ratio: To calculate the debt-to-equity ratio, divide the business's total debt by its total equity. For example, if a business has $500,000 in debt and $100,000 in equity, its debt-to-equity ratio would be 5:1.
Interpretation of the 9:1 Ratio: The SBA considers a debt-to-equity ratio of 9:1 or higher to be indicative of financial risk. When a business's debt-to-equity ratio exceeds this threshold, it may be required to inject additional equity into the business to demonstrate its financial stability and reduce the risk of default on an SBA loan.
Example of a Business Below the 9:1 Ratio: Suppose a business has $750,000 in debt and $150,000 in equity. Its debt-to-equity ratio would be 5:1, which falls below the 9:1 threshold. In this scenario, the business would not be required to make an equity injection as it is considered financially stable.
Example of a Business Above the 9:1 Ratio: If a business has $1,200,000 in debt and $100,000 in equity, its debt-to-equity ratio would be 12:1, exceeding the 9:1 threshold. In this case, the business would likely be required to inject additional equity into the business to lower its debt-to-equity ratio and meet the SBA's requirements.
Equity Injection If Cash Payment
The equity injection can be paid by the borrower in cash, preferably wired to the lender a week or two before the loan closing. The money can come from savings, investments, a Home Equity Line of Credit (HELOC), or as a gift (with a gift letter as proof). Lenders usually require the most recent account statement for verification.
Full Standby Note
The SBA made a big change to the full standby seller note. Now the seller can finance the full ten percent of the equity injection requirement.
No principal or interest can be paid during the first two years standby period.
This option enables the borrower to purchase a business with no money down.
Partial Standby Note
A partial standby is where interest only payments can be made for the first two years but not principal payments.
The seller can finance up to 7.5% in a partial standby note.
The SBA requires 2.5% to come from a source other than the seller.
Adequate cash flow has to support the partial standby option.
Expansion Through Acquisition
Expansion Loans
Business Expansion Loans do not require an equity injection. When an existing business starts or acquires a business that is in the same 6-digit NAICS code with identical ownership and in the same geographic area as the acquiring entity and they are co-borrowers, SBA considers this to be a business expansion and not a new business.
Expansion Acquisition
When an existing business purchases another established business.
There is no down payment requirement for one business purchasing another business if three conditions are met.
1. The target business to purchase is in the same industry
2. The target business to purchase is in the same geographical area as your current business
3. The exact same current ownership structure will be applied to the purchased business.
If all three of these conditions are met then no equity injection is required. If all three conditions are not met, then the ten percent equity injection rules apply.
What down payment sources qualify for SBA loans?
Savings
Liquidating from investment account(s)
Gift (gift letter must be provided)
HELOC
What is the process of making payment?
For SBA loans the typical way it works is the down payment is wired to the bank. The bank is required by the SBA to see statements that show the amount was in that account for two full months before the down payment was sent. If the money was pulled from multiple accounts then multiple account statements will have to be provided.
Yes.

SBA Loans

The U.S. Small Business Administration (SBA) was created in 1953 to assist small businesses with guaranteed loans covering many of the small business needs for most industry types. The 7(a) program is the Small Business Administration’s flagship program and all SBA data on this website is referring to loans under the SBA 7(a)program.
The mission of the Small Business Administration is "to maintain and strengthen the nation's economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters".
Through the SBA 7(a) guaranteed lending program, the SBA guarantees part of the business loan that a SBA approved lender provides. In the case of a loan default, the lender isn’t on the hook for all of the unpaid loan amount. This SBA guarantee results in lenders providing loans to small businesses that they otherwise would not.
See sba.gov
The term “SBA Loan” is a bit of a misnomer in that the SBA does not provide the loan.
An “SBA loan” is not a loan from the SBA but a loan provided by a bank or lender that is partially (50% to 90%) guaranteed by the SBA.
The bank or lender provides the loan and the SBA backs the loan with their guaranty.
What kinds of businesses are eligible for SBA loan?
Eligible businesses must:
- Be an operating business.
- Operate for profit.
- Be located in the U.S.
- Be small under SBA size requirements
- Not be a type of ineligible business
- Not be able to obtain the desired credit on reasonable terms from non-federal, non-state, and non-local government sources.
- Be creditworthy and demonstrate a reasonable ability to repay the loan.
What can SBA loans be used for?
7(a) loans can be used for:
- Acquiring, refinancing, or improving real estate and/or buildings
- Short- and long-term working capital
- Refinancing current business debt
- Purchasing and installation of machinery and equipment
- Purchasing furniture, fixtures, and supplies
- Changes of ownership (complete or partial)
- Multiple purpose loans, including any of the above
SBA Standard 7(a) Program loans are backed by an SBA guarantee of 85% for loans up to $150,000 and 75% for loans greater than $150,000. Qualified lenders may be granted delegated authority (PLP) to make eligibility determinations without SBA review. Loans provided typically on 10 year terms with a maximum loan amount of $5 million.
SBA Express Loans are backed by an SBA guarantee of 50 percent, the lender uses its own application and documentation forms and the lender has unilateral credit approval authority as in the PLP Program. This method makes it easier and faster for lenders to provide small business loans of $350,000 or less, with SBA generally providing a loan guarantee to the lender within 24 hours of their request.
SBA Microloan Program was developed to increase the availability of small scale financing and technical assistance to prospective small business borrowers. Loans range from $500 to $50,000.
504 Certified Development Company (CDC) Loan Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A CDC is a nonprofit corporation set up to contribute to the economic development of its community or region.
Export Working Capital Loans are used to finance export sales - 90% SBA guaranty on a loan up to $5 million.
Terms
The standard SBA 7(a) loan not involving property is a 10 year term with matching 10 year amortization.
Straight property SBA 7(a) loans are on 25 year terms. Combining non-property loan will mix up the terms available. If the property portion is $1 more than the non-property loan portion then the whole loan amount would still be on a 25 year term.
If the non-property amount of the loan is larger than the property portion then terms can still extend anywhere from 12 to 17 years.
Rates
Interest rates are based on the prime rate currently at 8.50% plus the bank spread. The SBA puts caps on the spread based on if the loan is variable or fixed, the program, and the loan amount. Depending on the type of loan and amount currently rates can range from the mid 9% range to the mid 11% range. See Rates FAQ.
Amounts
The SBA guaranty goes up to $5 million and many of the preferred lenders will offer pari passu loans that adds a conventional sleeve to get the total loan amount to $7 million.
While there isn’t a minimum, many lenders will not move forward with loans under a certain minimum amount like $100,000 or $150,000. There are also lenders who have never funded an SBA loan over one million and aren’t going to start with you. It’s all about matching to the right lender for the amount (amongst other things) you need.
Some of the key benefits of an SBA loan are:
- Ten year terms, no balloon payments (when real estate is not included).
- No pre-pay penalty terms up to 15 years.
- Up to $5 million in loan dollars and $7 million pari passu loans.
- SBA loans don’t require down payments for startups or for business expansion acquisitions.
- More forgiving on credit and red flag issues than most conventional banks for criteria like previous BKs, credit score, criminal record, and collateral requirements
- Minimal ongoing covenant requirements compared to most conventional loans.
What are the SBA fees associated with an SBA loan?
SBA Guaranty Fee (Upfront Fee) for Loans with Maturities Longer Than 12 Months:
Loans of $1 million or less:
- No fee.
Loans between $1 million and $2 million:
- 1.45% of the guaranteed portion up to $1 million.
- 1.70% of the guaranteed portion over $1 million.
Loans over $2 million:
- 3.50% of the guaranteed portion up to $1 million.
- 3.75% of the guaranteed portion over $1 million.
Fee Examples:
Loan Amount = SBA Fee
$1,000,000 $0.00
$1,500,000 $1,856.25
$2,000,000 $10,500.00
$2,500,000 $18,187.50
$3,000,000 $25,875.00
$3,500,000 $33,562.50
$4,000,000 $41,250.00
$4,500,000 $48,937.50
$5,000,000 $56,625.00
There are no prepay penalties for a standard ten year term SBA loan. However, for loans with a maturity of 15 years or longer, prepayment penalties apply when: The borrower voluntarily prepays 25 percent or more of the outstanding balance of the loan OR when the prepayment is made within the first three years after the date of the first disbursement of the loan proceeds.
The prepayment fee is:
- During the first year after disbursement, 5% of the amount of the prepayment.
- During the second year after disbursement, 3% of the amount of the prepayment.
- During the third year after disbursement, 1% of the amount of the prepayment.

Conventional Loans

What are conventional business loans?
Conventional business loans are traditional financing options provided by the commercial side of banks, credit unions, and increasingly, online lenders. Unlike government-backed SBA loans, conventional loans rely solely on the lender's risk assessment and are not guaranteed by the government. This translates to more stringent eligibility requirements but can also offer faster approval processes and potentially lower interest rates.
Which Lenders Provide Conventional Term Loans?
Some of the most aggressive conventional franchise lenders are on the LoanBox App. There are lenders who only provide non-SBA loan types and SBA banks who also provide conventional loans to qualified borrowers for franchises in a specific industry and/or a specific city or state.
A great thing about LoanBox is you don’t have to think about it. When you complete your loan application and package the matching conventional lenders and loan options are filtered for the exact lenders with the highest probability of funding your loan with the least amount of stress and through the LoanBox platform, in the most streamlined way possible.
Requirements & Considerations:
While specific requirements vary by lender, common factors influencing loan approval include:
Creditworthiness: Strong individual and business credit scores are typically essential for competitive rates and approval.
Financial Health: Lenders analyze your financial statements, debt ratios, and business plan to assess your ability to repay the loan.
Collateral: To mitigate risk, lenders may require personal guarantees or business assets as collateral for the loan.
Industry and Experience: Established businesses in stable industries with proven track records typically have a higher chance of approval.
TERMS: 3, 5, 7 AND 10 YEAR
RATES: Current Range 5.5% to 8.5%
PREPAYMENT: Yes, varies by lender
LIEN POSITION: Lender in First Lien Position
LOAN AMOUNTS: $500,000 to $50 million
TYPICAL AMOUNTS: $2 to $10 million

401 (k) Business Financing
Rollover for Business Start-ups

The Rollover for Business Start-ups (ROBS) provides a distinctive avenue for aspiring entrepreneurs to leverage their existing retirement accounts to finance their business ventures. While enticing, this option is enmeshed in a complex array of considerations. From significant upfront costs and stringent regulations to potential risks to your long-term financial security, it is imperative to fully grasp the intricacies of ROBS before proceeding.
Tax-Advantaged Access to Retirement Funds: A ROBS plan allows you to tap into your retirement savings without facing hefty early withdrawal penalties or taxes (consult a tax advisor for details).
Debt-Free Funding: Unlike loans, a ROBS plan provides funding without accumulating debt or affecting your credit score, giving you more control over your investment without the burden of interest payments.
Enhanced Control Over Investment Funds: Compared to traditional retirement accounts, a ROBS plan offers greater flexibility in directing your funds towards your business objectives.
Tax-Exempt Investment: The ROBS plan itself enjoys tax-exempt status, providing additional financial benefits.
Accelerated Business Growth: By eliminating debt burdens, a ROBS plan can potentially expedite profitability during your business's early stages.
While the Rollovers as Business Startups (ROBS) plan can serve as a source of business funding, it's essential to weigh its potential drawbacks.
Here are ten drawbacks of the ROBS plan:
Risk to Long-Term Retirement: Leveraging retirement funds for business purposes exposes these funds to potential losses, which could jeopardize your future financial security.
Significant Upfront and Ongoing Costs: Implementing and maintaining a ROBS plan can be expensive, with initial setup costs and monthly charges that can accumulate over time.
Limited Business Structure Options: The ROBS plan necessitates operating as a C Corporation, which carries different tax implications and administrative burdens compared to other business structures.
Strict Regulations and Compliance: ROBS plans are closely monitored by the IRS and Department of Labor.
Any non-compliance can lead to substantial penalties and even disqualification of your retirement plan.
Active Business Requirement: The ROBS plan precludes passive income sources like rentals or royalties. The business funded by ROBS must be actively operated, and all rollover participants need to be actively involved.
Increased Audit Risk: While not guaranteed, using a ROBS plan may heighten the likelihood of an IRS audit, which would necessitate additional documentation and scrutiny.
Compensation Restrictions: Business owners are prohibited from drawing excessive salaries or benefits from the C Corporation funded by the ROBS plan.
No Lending Between Plan and Owner: The ROBS plan prohibits any financial transactions between the C Corporation and the business owner.
No Personal Use of Business Funds: IRS rules strictly restrict the personal use of business assets funded through the ROBS plan.
Loss of Compound Interest: By withdrawing funds from your retirement account for business investment, you forfeit the compounding interest those funds could have earned over the long term. This could significantly impact your future retirement savings.
The ROBS plan does not have a specific inception date assigned by the IRS. Its foundation stems from existing regulations permitting rollovers from retirement accounts to purchase Qualified Employer Securities (QES). The application of these regulations to fund business start-ups gained momentum in the early 2000s, coinciding with the emergence of companies offering ROBS administration services.
The term "Rollover for Business Startups" (ROBS) was never officially coined or adopted by the IRS. Consequently, there is no specific year marking its use by the IRS. The concept of utilizing retirement funds to start a business is rooted in existing IRS regulations that allow rollovers from retirement accounts to purchase QES. However, these regulations do not specifically reference business start-ups.
QES stands for Qualified Employer Securities, which typically refers to company stock that a qualified retirement plan can acquire using funds rolled over from another retirement account. In the context of ROBS, a C Corporation is established for the business, and the owner's rolled-over retirement funds are used to purchase company stock, thereby funding the business. These purchased shares are classified as QES. The IRS acknowledges the use of QES for business ventures but generally refers to it as "funding a business with rollovers from IRAs and employer-sponsored plans" or similar terminology. You can find references to this on their website, such as in the "Guidelines regarding rollover as business start-ups" document. While the term ROBS is not formally recognized by the IRS, it has become industry shorthand for this particular application of QES regulations.
Establishing a ROBS
Given the financial risks outlined below, a ROBS (Rollovers as Business Startups) is most suitable for individuals with substantial retirement savings. Here are the five steps to establish a ROBS and invest in a new business:
1. Form a C-Corporation: The first step is to create a C-corporation (C-corp). Only a C-corp can issue stock and have shareholders, making it the sole business structure feasible for a ROBS arrangement under IRS regulations.
2. Create a Retirement Plan for the New C-Corp: Next, set up a retirement plan for the C-corp. The appropriate type of retirement plan depends on factors such as the number of employees and the retirement benefits provided. Typically, this process requires a third-party record keeper, a trustee, and an asset custodian to manage the plan's investments.
3. Transfer Funds from Prior Employer’s Retirement Plan: Transfer existing retirement funds from a previous employer’s 401(k) plan or a personal IRA to the new retirement plan sponsored by the C-corp. This new 401(k) plan can then invest in the new business, becoming a shareholder in the C-corp.
4. Purchase C-Corp Stock with the New Retirement Plan: Use the ROBS funds to buy stock in the new C-corp at fair market value. The C-corp issues shares that the new retirement plan and any potential outside investors can purchase.
5. Invest in the Corporation: Once the retirement plan has acquired stock in the new C-corp, those funds can be used by the C-corp to invest in the business. The IRS and the United States Department of Labor (DOL) mandate that all contributed funds be used solely for business purposes related to the new C-corp and not for personal activities.
This structured process ensures that small business owners and franchise owners can leverage their retirement savings to invest in their new ventures, maintaining compliance with IRS and DOL regulations.

Minimum Level of Available Assets to Invest in ROBS: Most ROBS providers stipulate a minimum level of personal retirement savings to establish a ROBS. While not an absolute requirement, providers typically want to ensure sufficient funds are available for investment in the new venture and to cover initial ROBS setup expenses. These expenses can vary, but many providers require a minimum of $50,000 or more.
An Existing Retirement Account: To comply with IRS rules, rollover funds must come from a previous employer’s retirement account or a self-directed account (e.g., solo 401(k) plan or personal IRA) not associated with a current employer. Adhering to IRS rollover rules is crucial to avoid restrictions and tax penalties. Note that Roth IRAs and Roth 401(k) accounts are ineligible for ROBS.
An Employee of the New Business: The IRS mandates that investors using a ROBS arrangement must also be legitimate employees of the business in which the funds are invested. Although the IRS does not specify a minimum number of hours to qualify, many 401(k) plans require at least 1,000 hours per year for initial eligibility. This can serve as a useful benchmark. Conversely, it may be challenging to demonstrate active employment if the primary aim of a ROBS is to invest in real estate as a passive business owner.
Both the Internal Revenue Service (IRS) and Department of Labor (DOL) uphold specific compliance standards for Rollover for Business Startups (ROBS) investments. While audits of ROBS are relatively rare, they are conducted to ensure adherence to established rules. Non-compliance can result in significant tax penalties and fines.
Key Compliance Aspects Under Scrutiny
During an audit, government agencies meticulously review several facets of the ROBS plan, including:
Proper establishment and documentation of the new retirement plan in accordance with IRS regulations.
Fiduciaries' review of costs and fees, ensuring they are appropriate and paid on time to third-party vendors.
Timely and accurate filing of all required annual reports, such as the Form 5500.
Offering eligible employees participation in the retirement plan.
Ensuring employees have the same opportunities to invest in the retirement plan as the business owners do.
Staying Compliant with ROBS
To ensure adherence to ROBS rules, business owners should:
Properly Form and Maintain Your C-Corp: Adhering to corporate formalities, such as conducting shareholder and director meetings and maintaining corporate records, is crucial. Non-compliance may lead to the IRS disregarding the corporation, resulting in additional tax implications.
Follow ERISA Rules: Complying with the Employee Retirement Income Security Act (ERISA) standards is essential for private sector retirement plans, including those established through ROBS. This helps avoid penalties and maintains the tax-deferred status of your plan.
Maintain Accurate Records: Keeping precise and comprehensive records of all financial transactions related to the ROBS, including investments made by the retirement plan and any use of those funds by the corporation, is critical. This documentation will be vital in the event of an audit.
Avoid Prohibited Transactions: Ensure that all transactions between the retirement plan and the C-corp are not considered prohibited by the IRS. This includes avoiding any personal use of retirement funds or self-dealing between the business owner and their retirement plan.
Submit Annual Reports to the IRS: ROBS must submit annual reports to the IRS, including Form 5500. Non-compliance can result in significant penalties and may even disqualify the plan.
Navigating the complexities of ROBS compliance can be challenging. However, partnering with a reputable ROBS provider and consulting with a tax professional can ensure all legal and regulatory requirements are met. By staying compliant, small business owners and franchise owners can maximize the benefits of using their retirement funds to invest in their new ventures.
The process of unwinding a Rollover for Business Startups (ROBS) plan, much like its establishment, must adhere to IRS requirements. This can occur during various corporate transactions:
Stock Sale: In a stock sale, proceeds are distributed proportionally among stakeholders, including the retirement plan. The retirement plan's share from the net sale proceeds is typically rolled into an IRA for the benefit of the owner and employees.
Asset Sale: In an asset sale, the proceeds are primarily used to cover transaction expenses. The remaining net proceeds are then distributed to business owners, including the retirement plan that funded the business.
Bankruptcy: In the event of bankruptcy or business closure, the retirement plan established with a ROBS must be terminated according to IRS rules on retirement plan terminations. Following the liquidation of the company's assets, the remaining funds are used to repurchase as many shares of stock as possible owned by the retirement plan. Any leftover funds in the retirement plan are typically transferred into an IRA for the benefit of the employees and business owners. In such cases, the business owner is not obligated to repay the original investment funds to themselves and will generally lose most, if not all, of the original investment that funded the ROBS.
A ROBS provider typically guides prospective business owners through the necessary steps. The initial setup often involves a one-time fee of around $5,000. This fee usually covers the creation of a C-corp, the establishment of a new retirement plan, and the preparation of initial IRS filings. Additionally, there may be a recurring monthly administrative fee of approximately $150 to manage the new retirement plan and handle annual IRS filings, such as Form 5500.
ROBS Plan: Short for Rollovers for Business Startups, this financing strategy allows individuals to use their retirement funds to start a business without incurring tax penalties.
C Corporation: The required corporate structure for implementing a ROBS plan. Unlike other entities, a C corporation can sell shares of its stock to the retirement plan.
Eligible Retirement Account: Types of retirement accounts like a 401(k) or traditional IRA that can be used to fund a business under a ROBS plan. Not all retirement accounts qualify.
Funding Company: The C corporation established to receive funds rolled over from the eligible retirement account in a ROBS plan.
Business Purchase: One way to use transferred funds under a ROBS plan is to buy an existing business or franchise.
Operating Capital: Funds from a ROBS plan can be used for business expenses such as payroll, rent, and inventory.
Plan Administrator: The person or entity responsible for managing the retirement plan under a ROBS strategy, ensuring compliance with IRS and Department of Labor regulations.
Plan Participant: The individual whose retirement funds are rolled over to fund a business. They become an employee of the new business and a participant in its retirement plan.
Prohibited Transaction: A transaction that violates IRS regulations. Avoiding prohibited transactions is crucial to maintaining the tax-advantaged status of a ROBS plan.
ROBS Setup: The process of establishing a ROBS plan, which includes setting up a C corporation, creating a new retirement plan, rolling over funds, and purchasing stock in the new corporation.
Stock Purchase: In a ROBS plan, the retirement plan buys stock in the new or existing business, transferring funds from the retirement account to the business.
Tax-Deferred: A ROBS plan allows the use of retirement funds for business startup costs without paying taxes on the money, keeping the funds tax-deferred until withdrawn from the retirement plan.
401(k) Plan: A type of retirement account that can be utilized in a ROBS plan. Funds are rolled over from a 401(k) to the new business's retirement plan.
Internal Revenue Service (IRS): The U.S. government agency responsible for tax collection and enforcement. It monitors ROBS plans to ensure compliance with tax laws and regulations. Non-compliance can result in severe tax penalties and disqualification of the ROBS plan.
Qualified Employer Securities (QES): Stocks or other securities issued by the corporation using a ROBS plan that the retirement plan can purchase. This purchase is vital for transferring funds from the retirement account to the business without triggering a taxable event.

USDA

What are USDA loans?
USDA Loan, a government-backed program offering a unique lifeline for rural franchisees. For many aspiring entrepreneurs, owning a franchise holds the allure of brand recognition, established systems, and a proven path to success. But for those who dream of building their franchise empire in rural America, finding the right financing can be a challenge. Enter the USDA Loan, a government-backed program offering a unique lifeline for rural franchisees.

Who is eligible?
Certain industries, like agriculture, food processing, and renewable energy, are particularly favored by the USDA. Think farm-to-table restaurants, eco-friendly cleaning services, or innovative agricultural technology franchises.
Not all franchisees and industries are created equal in the USDA's eyes. To qualify, your franchise must:
Operate in a rural area: Defined as a town with a population of under 50,000, or a contiguous area with similar characteristics.
Contribute to rural development: This can include job creation, increased tax revenue, or revitalizing the local economy.
Be a for-profit or non-profit business.
What are the pros and cons?
- Pros:
  - Access to capital for rural franchisees
  - Lower interest rates and flexible terms
  - Reduced risk for lenders, potentially leading to better loan offers
  Cons:
  - Strict eligibility requirements
  - Lengthy application process
  - May require additional documentation

Typical Rates & Terms:
Interest rates for USDA Loans are typically lower than traditional bank loans, often falling within the 6.5% to 7.5% range. However, the specific rate will depend on your credit score, loan amount, and other factors. Repayment terms can range from 5 to 25 years, with longer terms available for certain projects.
Here are a few examples of the types of franchises that may be a fit for rural based USDA loans:
Food & Beverage:
- Fast food restaurants: Franchise chains often flourish in rural areas due to fewer competitors and strong community patronage.
- Coffee shops and bakeries: Rural communities appreciate convenient coffee options and fresh baked goods.
- Convenience stores: Gas stations with attached convenience stores cater to travelers and locals in rural areas, offering essential goods and services.
- Grocery stores: Smaller grocery chains fill gaps in rural food access, becoming crucial community hubs.
Retail & Services:
- Auto parts and repair: Franchisees can be profitable in rural areas with high car ownership and limited alternative options.
- Hardware stores: Franchises providing crucial home improvement and farm supplies to rural communities, often becoming go-to destinations.
- Pet and Veterinary: Franchises like VCA Animal Hospitals can bring much-needed pet and vet care for rural communities.
Hospitality & Travel:
- Hotels and motels: Budget-friendly chains like cater to travelers passing through rural areas or visiting popular spots.
- Campgrounds and RV parks: Rural landscapes often attract outdoor enthusiasts, providing franchise expansion opportunities.
- Bed and breakfasts: Unique B&Bs can thrive in rural settings with stunning scenery and historical charm, offering personalized experiences.
Healthcare & Education:
- Urgent care centers: Franchises can provide accessible basic healthcare options in rural areas with limited hospital access.
- Senior care facilities: Assisted living franchises can fill the need for quality senior care in rural communities with aging populations.
- Childcare centers: Franchises can offer reliable childcare options in rural areas where childcare might be scarce.

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