Moran Family of Brands is here to help you learn more about SBA loans for franchises and how they can help you own your own business in the aftermarket auto industry with the benefits of an already established brand.
Understanding SBA Loans
Embarking on the journey of business ownership is an exhilarating experience. For many, the dream of owning a business is often met with financial hurdles. However, there's a beacon of hope for aspiring entrepreneurs — the U.S. Small Business Administration (SBA) loans. These loans, specifically designed to assist small businesses, can be a game-changer for those looking to dive into the franchise world, especially in the auto repair industry.
The SBA is a U.S. government agency that provides support to small businesses and entrepreneurs. SBA loans aren't directly from the SBA but facilitated by them. The SBA guarantees a portion of the loan, reducing the risk for lenders, which results in better terms and interest rates for borrowers.
There are 33.2 million small businesses in the United States, employing 67.1 million people, according to the SBA. Small businesses created 62.7% of net new jobs since 1995. In 2022, the SBA reached nearly $43 billion in funding to small businesses, providing more than 62,000 traditional loans and more than 1,200 investments through SBA-licensed Small Business Investment Companies.
The SBA has three main types of loans:
- 7(a) loans: These loans help startups and existing small businesses obtain financing for a variety of purposes, including working capital, expansion, equipment purchases, and even refinancing existing debt.
- 504 loans: The 504 loan program’s primary purpose is to promote economic development, create and retain jobs, and assist small businesses in obtaining the necessary funds to purchase major fixed assets, such as real estate and equipment.
- Microloans: The SBA Microloan Program assists small businesses and certain not-for-profit childcare centers in obtaining the necessary financing to start or expand their operations. The funds are for various purposes, including working capital, inventory, supplies, furniture, fixtures, machinery, and equipment.
The Pros and Cons of SBA Loans
To understand if an SBA loan is the right choice for you, let’s explore the advantages and disadvantages of choosing this type of loan to launch a business.
PROS:
- SBA loans often require smaller down payments, making them more accessible for entrepreneurs.
- They typically have extended repayment periods, resulting in lower monthly payments.
- Due to the government guarantee, interest rates are lower than traditional business loans.
- Borrowers can access the SBA's network of Small Business Development Centers (SBDCs), Women's Business Centers, and SCORE chapters, which offer free counseling, training, and business advice.
CONS:
- The process can be time-consuming, with multiple layers of approval.
- Expect a lot of paperwork. You’ll need documentation on everything from business plans to financial statements.
- Some SBA loans may require collateral, which can be a hurdle for some applicants.
Franchise Eligibility for SBA Loans
Yes, franchises are eligible for SBA loans! The SBA recognizes the value and stability that franchises bring to the table. With a proven business model, established brand recognition, and ongoing support, franchises often have a higher success rate when compared to independent startups. However, not all franchises are eligible. The SBA maintains a Franchise Directory, which lists all the franchise brands that meet their criteria. If a franchise is on this list, it's considered "SBA-approved," simplifying the loan application process.
One of the significant costs of starting a franchise is the franchise fee. This fee, paid to the franchisor, grants the franchisee the right to operate under the brand's name and receive the associated benefits. The good news? You can absolutely cover a franchise fee with an SBA loan. Additionally, the SBA loan for franchises can also be used for other startup costs, including equipment purchases, inventory, and even real estate.
While SBA loans offer numerous advantages, securing one requires a thorough process. Lenders will evaluate your credit history, business plan, financial projections, and your experience in the industry. In the context of franchising, partnering with a well-established brand like Moran can bolster your application. Our track record of success, comprehensive training programs, and ongoing support can demonstrate to lenders that you're a sound investment.
Franchising with Moran Makes Financial Sense
When evaluating the financial aspects of starting a business, franchising, especially with a reputable brand like Moran Family of Brands, offers a distinct advantage. Moran is the franchisor of six brands, including Milex Complete Auto Care, Mr. Transmission, and Turbo Tint. Here's what makes Moran a good choice.
- Proven business model: With Moran, you're not starting from scratch. You're adopting a tried and tested business model, reducing the risks associated with business ownership. Moran was founded in 1990 and is one of the largest aftermarket automotive franchisors. Our goal is to develop and maintain long-term relationships in all aspects of our work with our franchisees and customers.
- Brand recognition: Moran is one of the best automotive franchises. This recognition can be a significant advantage when attracting customers and when seeking financing. Our franchise owners create a higher standard of excellence for automotive repair service, window film, and safety products.
- Ongoing support: From training to marketing, Moran provides continuous support, ensuring you're never alone in your business journey.
In the realm of auto repair and maintenance, the industry's growth trajectory indicates a promising future. With the increasing number of vehicles on the road and the evolving complexity of automotive technology, the demand for expert auto care services is evergreen.
Join the Moran Family
If you're a car aficionado with dreams of business ownership, the path of franchising, backed by the financial support of SBA loans, can turn your dreams into reality. To learn more about how to become a franchisee with Moran, fill out our online form.