Small Business Articles
Basics - Franchise Financing Programs (SBA & VA)
There are several franchise finance assistance programs offered by the US Government. Both are in the form of loan guarantees made to lenders. Programs are offered by the:
USA - Small Business Administration (SBA)
- Franchise Registry. In 1998 a central registry of franchise systems eligible for SBA loan guarantees was established. Since registry franchisors have been preapproved, the processing time for a franchisee being approved for a loan is shortened. To use this program a franchisee requesting SBA financial assistance needs to provide a one page certification from the franchisor stating that the prospective franchisee's contract is the same as the form approved by the registry originally.
USA - Department of Veterans Affairs (VA)
- VetFran. The Veterans Financial Franchise Initiative (VetFran) was initiated in the early 1990s as a way for franchisors to thank members of the military for their service during the Gulf War. VetFran allows service members to pay only 10 % or less of the total initial investment cost of purchasing a franchise. That difference between the required franchise fee and what the franchisee has available to invest is contributed by the participating franchisor as part of an "initial earned equity". Many International Franchise Association (IFA) members participate in the program. The franchisee must be able to qualify for a SBA 85% loan guarantee package. At the present time VetFran is limited to franchises with initial investments which are $ 150,000 or less.
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