How to Purchase a Franchise With an SBA Loan

When a candidate’s financial capabilities have been vetted and prequalified, it’s time to review the steps it takes to purchase a franchise. Thankfully, we have an expert source in Larry Rogers. He’s the president of LoansForBusiness.com and has over two decades of lending experience specific to the preschool franchising industry. As of the beginning of this year, Larry became the point person for supporting Celebree’s franchisees as they navigate the SBA loan process. In his own words, here’s what the SBA loan process of purchasing a franchise looks like…

On Investigating “Loan Worthy” Franchise Concepts

“You should look for a successful brand that you can trust.  A brand that you get good feelings about when you meet and talk.  A brand you can rely on with knowledge about their industry, one who has ‘been there done that’ and knows ‘where you are coming from’ when you become an operator of a preschool.  Also, one that is listed on the SBA Franchise Registry. Being on the Registry means the SBA approves of the concept and therefore you can get SBA financing. Celebree is approved on the SBA Registry.”

When to Apply for an SBA Loan

“A franchisee can contact us at any time to get prequalified. They don’t have to move forward with the loan request until the time comes.  Many times, they call us when they are about ready to sign a lease, or the building permit has just been issued for a location they are leasing. If the franchisee is going to purchase a building or land in which to build a school, they usually contact us when they have found a site and ready to sign a Letter of Intent (LOI).”

Applying for an SBA Loan

“The SBA process hasn’t really changed much over the years. Loans are still underwritten in the traditional way versus the ‘point and click’ loans that people are getting used to by now. The borrowers need a good concept like Celebree, some good business experience and a good location to start. Underwriting needs a full financial package, including business plan and projections in order to make a loan decision. Together, we help Celebree candidates put a comprehensive loan package to submit to the bank for the best chance of underwriting success.”

Loan Processing & Approval

“Typically, it takes only a few days to get prequalified for a loan and be issued a proposal for your project.  If the franchisee wants to proceed with the proposal, we need to work with them on completing a finance package and SBA application for the bank to underwrite. That process can take a couple days to a week, depending on the complexity of the borrowers’ financial situation, (affiliate businesses, number of partners, etc). Once a full loan package is complete, we send to the bank and the bank puts the loan request in line for underwriting. The bank’s decision process can take three to four weeks (depending on complexity, loan size or backlog). Typically, after this time, the underwriter has spoken to the franchisee and the bank will issue a commitment letter. The franchisees typically sign the letter and send it back to the bank in order to start the closing process. The closing process starts once the bank receives the signed commitment and assigns the loan to a closer, who creates a closing checklist for the franchisee and bank to complete. Then a closing date is scheduled once the checklist is complete. Closing time is usually scheduled a few months before certificate of occupancy (if you have signed a lease) or around building permit time if you are starting a school with ground up construction.”

Further Reading & Research

“The SBA website is probably the most reliable source, but even then, sometimes their information may be out of date because new SBA changes have yet to be implemented to the website. Use www.sba.gov to access the SBA’s website. Frankly, most of the time, it’s easier for a franchisee to call us first, so we can speak to them regarding their plans and specific situation.”

Are you ready
to make a
difference?

Families in your community need high quality, dependable childcare that grows people big and small. With Celebree, you can fill that need while building a lasting business.
If you want to make a contribution to your community and you are passionate, ethical, creative, motivated, and collaborative, you may be the ideal fit for Celebree.
By clicking submit you are agreeing to our terms and conditions and opting in to receive email and SMS messages from Celebree regarding your interest in franchising. Message and data rates may apply. privacy policy.