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Albert Singer – franchising with the SBA 504 loan

The halls of history echo with the pen strokes of the first franchise contract signed by Albert Singer, as he forever changed the small business landscape of a future America. As he laid the foundation for franchise development, he opened up opportunities for entrepreneurial spirits who would later dot the landscape with businesses like restaurants, hotels and car dealerships that would provide jobs for many. Those pen strokes would significantly impact the history of San Bernardino County where one of the most recognizable franchises in the United States, McDonalds, had its beginning. When small business lending detracted in recent years, new potential franchise owners found it difficult to start their businesses. This lending crisis gave rise to a franchise pre-approval program from the Small Business Administration (SBA) that is helping entrepreneurs fund their dream (as Ray Kroc well said) of being “in business for yourself, but not by yourself.”


In recent years, franchise lending from the SBA has seen significant increases. The most recent data from the Coleman Report, the National Association of Development Companies (NADCO) and the International Franchise Association (IFA), finds that in 2012, $2.5 billion in funds were loaned to new franchise businesses through the SBA 504 loan program, a 67 percent increase from the prior year. Total SBA lending to franchises increased by $3.8 billion in the same year.


The economic impact of the franchise industry on a community is not insignificant. According to the IFA, employment by franchises accounts for over 8 million jobs, nearly 6 percent of the work force, and is increasing at almost double the speed of the rest of the economy. Roughly 10 percent of new jobs in 2012 were from franchise employment.


The Inland Empire continues to battle with higher unemployment rates than the rest of California and the nation. According to the Employment Development Department of the State of California; in November 2013, the Inland Empire’s unemployment rate was 9.4%, compared to 8.3% for the state of California, and 6.6% for the nation. Teens, who often find work in the franchise sector, saw a 21.3 percent unemployment rate in 2013 according to the Bureau of Labor Statistics.


Enterprise Funding Corp., the local Certified Development Company (CDC) for the SBA 504 loan program, has successfully funded loans for many franchises that have brought jobs into the Inland Empire and High Desert regions. Among them are; Beef O’Brady’s in Hesperia, Aaron’s Furniture in Indio and Banning, Arco’s in Upland, Cathedral City, Corona, and Perris and Farmer Boys in Victorville and Hesperia. In addition EFC has done loans for franchisees such as Subway, El Pollo Loco, Holiday Inn Express, Union 76, Popeye’s, Golden Corral, Best Western, Camille’s, Chevron, Shell/Tesoro, and Hampton Inn.


According to Jeff Sceranka, President of Enterprise Funding, “We can very easily streamline loans to franchises on the SBA’s pre-approved list. Once we know a borrower is working with a pre-approved franchise, the process can move very quickly.”


Unlike a traditional loan, which typically requires 20 percent down, an SBA 504 loan typically requires only 10 percent down and has a long-term, fixed rate.

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