Conventional Loans | International Franchise Association

Conventional Loans


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

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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.

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