Of all the business loans that exist, the one that you have probably heard about most is the SBA 7(a) loan. They are perhaps the most popular business loan that exists, and a very common choice for small business owners that are looking for financial support. They are also an excellent choice for entrepreneurs looking to start up a new business.
If you are looking to open up a franchise business, then an SBA 7(a) loan is a wonderful place to start. But knowing which franchise to open up is often very difficult. There are so many business chains that are now open to franchises that it can make it difficult to choose where to put your money.
In this guide, we’ll be taking a look at what the best franchises to start with an SBA 7(a) loan are. So with no further ado, let’s get started.
Why set up a Franchise with an SBA 7(a) Loan?
If you are reading this, then you might be wondering why you might want to set up a franchise with an SBA 7(a) loan. Franchising is one of the fastest growing ways to start your own business, and this is why franchises are such a popular choice among those who want a business but don’t know where to start.
When you open a franchise, you are given a license by the franchisor, which dictates that you are now a franchisee. This allows you to set up your own business using the trade name and running practices of that chain, while remaining the owner of your own small business.
In the past 20 years, franchising has skyrocketed in popularity. This style of business often has a high upfront fee, but you can quickly make money as the business that you have bought already has a good reputation.
So, you might choose to set up a franchise to run as your own business because it does make the initial start up process a lot easier. As we have said, franchises often require a rather large down payment at the beginning of the contract in order to receive the trademarks and operating practices for that chain.
Alternatively, you might be able to set up a contract with the company where they take a cut of the profits instead.
You might wonder why you would want to give this large amount of money to the company when you could just start your own business. But, setting up a franchise instead removes a lot of the struggles that most startups have.
As it is a franchise, the business will already have a great reputation, and it will come with lots of other benefits. So, this is why you might choose to set up a franchise instead of starting your own business.
Top 3 Franchises to Start with an SBA 7(a) Loan
Based on everything that we have just told you, it is understandable why someone might choose to set up a franchise with an SBA 7(a) loan. But, what is the best franchise to set up?
When you think of franchises, your mind automatically jumps to coffee or fast food chains, but there are lots of different types of businesses which offer franchises. You might immediately think of setting up a McDonald's’s or a Domino's franchise, but is this really the best choice? Let’s take a look at the top 3 franchises to consider starting up with an SBA 7(a) loan.
One of the best franchises to set up with an SBA 7(a) loan is IntsyPrints. You might not have actually heard of this company before, but IntsyPrints is a printing and marketing company that has a good reputation in terms of franchises. A lot of people have set up franchises of IntsyPrints, and generally speaking they perform very well.
Studies suggest that during the time between 2000 and 2016, just 1 in 16 franchises of this company that were granted SBA loans defaulted on their payments. This suggests that the majority of franchises of this business are performing very well. But remember, there aren’t that many IntsyPrints franchises out there, so this will influence the statistics.
If you would prefer to invest your SBA 7(a) loan into a food franchise, then you should consider Farmer Boys. This is a fast food chain specializing in burgers, meat, and all things American. So, it is the perfect choice if you are a foodie who wants to run a franchise in this sort of industry.
Just like IntsyPrints, Farmer Boys also has an excellent reputation in terms of defaults on SBA loans. The default rate for these payments is even lower than that of IntsyPrints with a rate of just 4.35% between 2000 and 2016. So if you want to open a franchise in the food industry, this is the perfect choice.
Finally, another great franchise to consider is Comfort Keepers. This is an in-home senior care service, and they have businesses in 48 of the US States. It is very different from what you might first consider when looking to set up a franchise, but research suggests that they are a safe bet.
Their default rate is higher than the default rate for the other 2 companies that we have looked at, but Comfort Keepers also have a lot more franchises set up using SBA loans. Due to this, the default rate is 6.25%. But this is still a very low number, which is why they are a safe place to invest your money.
In short, in this guide, we have looked at some of the best franchises to start with an SBA 7(a) loan. You might be wondering why we haven’t suggested any ‘well-known’ franchises, and this is mainly because they have an insanely high default rate. So, if you want to set up a franchise, it is a much safer option to invest in one of the companies we suggested above.