SBA Loan Program for Franchises

• Types Of Financing: Acquisition, Refinance, Construction, Expansion
• Loan Amounts: up to $5,000,000
• Terms: 10, 25 Years (Depending on if business only or real estate transaction)
• Interest Rate: Prime + 0.5% – 2.75% (Varies by credit risk)
• Loan To Value: up to 90%
• Prepayment Penalties: 5-3-1% for first three years, none after that

A checklist for buying a franchise
1. Key financial information – Past three years and current financial statements
• Balance sheets
• Profit and loss statements
• Business tax returns
• Projected sales and profits of the franchise, and the method used to calculate them

2. Fees
• Current fees
• Ongoing fees
• What do you get for them?
• Advertising
• Promotional material
• Shop fit-out
• Equipment
• Training
• What are the conditions of the relationship?
• Are there transfer fees if you sell?
• How are royalties determined?

3. Other franchisees
• Does the disclosure agreement include a list of current and previous franchisees?
• What do they say about the business?
• Are their sales growing?
• How is the industry performing?

4. Legal, compliance and contractual issues
• Is the franchisor involved in any current or potential litigation?
• Do you need licenses or permits to operate the business?
• Check all existing contracts such as leases and mortgages, especially on the business premises
• Get your lawyer to check the franchise agreement.
• What are the restrictions on selling, staffing, pricing and supply arrangements?

5. Premises
• Is a lease involved?
• If so, check the lease. Is there a right to renew?
• Who owns the fit-out?
• Are there other inclusions?

6. Track record
• How long has the franchise business been established?
• Does it comply with the mandatory Franchising Code of Conduct?
• Obtain a credit reference on the franchisor

Let us put our experience and expertise to work for you. Call us (310) 356-6500