Since the economy went into recession, Congress passed several temporary changes to SBA loan programs. The changes benefit SBA franchise loans in several ways. First, the large upfront fees are temporarily subsidized. These fees are typically in the 2.75% range of the guaranteed portion of the loan. This results in a huge savings for franchisees seeking a Small Business Administration loan. We’re talking about $27,500 in fees vs. $10,000, on a $1,000,000 loan amount. However, the subsidy program runs out on December 31,2009.
The second major temporary change is an increased loan guarantee to banks. The loan guarantees on a 7(a) loan (up to $2 million) is 90 percent. When this particular program runs out, the loan guarantees will be 75 to 80 percent depending on the type of loan. This temporary change has made a huge difference to lenders that have been nervous about business only loans. With a 90 percent loan guarantee, the banks feel more comfortable making franchise loans under the SBA program.
Both of these programs have been highly successful for colorado sba loans, but if they go away on December 31 as scheduled, you may see banks lose interest in SBA lending.
It takes a minimum of 45 days ( if you are very insistent) to close an SBA 7(a) loan. If there are snags, the process can take longer. So, if you plan on taking advantage of this temporary program for a sba franchise financing, now is the time to get your loan application going.