Conventional loans can be provided by bank and non-bank lenders, but are not guaranteed by the SBA or other government entity. Any small business or franchise can apply; however, they are not typically available for new businesses. Approval depends largely on the overall credit risk of the business.
How it works: With conventional loans, the interest rate, term length, and loan amount depends on your credit rating and business revenues. The lender, whether it’s a big bank, community bank, credit union or other type, will typically require you to share an extensive amount of financial information including: personal credit history, the financial background of the business, future growth plans, and any other relevant information.
- Several options are available: Term loans, Commercial Real Estate Mortgages, Factoring, etc.
- Shorter approval time than SBA loans in most cases
- If successful in securing a loan, it becomes easier to get loans renewed or increased
- Suitable for a wide range of business purposes (there is a little more freedom on what you can do with the money)
- Extensive paperwork required to process loan
- Typically require collateral, good credit and a personal guarantee from business owner
- Many lenders don’t like to work with small businesses who need smaller dollar loans
- Shorter repayment time than SBA loans
- Potential prepayment penalties
- Approval rates are fairly low
Learn More about Franchising
“Owning a franchise allows you to go into business for yourself, but not by yourself.”
A franchise provides franchisees with a certain level of independence where they can operate their business.
The International Franchise Association is committed to educating prospective franchisees on the dynamics of franchising and providing them with information to begin their evaluation of whether to become a franchisee. Beginning with the adoption in 1970 of the first franchise disclosure requirement in California.