Article by Roger Schlueter, MBA
Franchise Businesses are a big part of Small Business today. From some of the first successful Franchise Businesses like McDonalds to newer Franchise Businesses like St. Louis Bread Co. or Jimmy Johns, Franchise Business is Big Business. Franchises are also a way to purchase a proven system of making money.
The SBA has a listing of all Franchise Businesses that are endorsed or approved by the SBA (Small Business Administration) for lending purposes. This listing is called the Franchise Registry. The Franchise Registry can be found at www.franchiseregistry.com . The Franchise Registry has listed all the Franchises, where the SBA has approved that franchises particular Franchise Agreement. The Registry also states the years that the Franchise Agreement has been approved. The particular franchise still has to give the borrower a Certification of No Material Change in order to be eligible for SBA Financing. This just certifies that the Franchise Agreement has not changed since the SBA gave it’s approval.
Many of the Franchises that are in existence are not on the Registry. These Franchises will have to have the SBA review their Franchise Agreement to determine it’s eligibility. The SBA attorney will review the Franchise Agreement Document and determine if it is acceptable to SBA. If the Franchise Agreement Document is not acceptable it is usually because the Franchisor imposes too much control over the Franchisee which they feel results in Affiliation. This is usually fixed by the Franchisor adding appropriate SBA language into the Franchise Agreement.
The main thing to remember is to start the process early to make sure you are eligible to borrow so you can get your loan is a timely fashion. Your bank should know something about this process but if they don’t they can look it up in more detail using the SBA’s SOP (Standard Operating Procedure).
Questions or Comment can be addressed to roger@rogerschlueter.com or at my website at schlueterfinancial.com .