Chem-Dry Franchise Complaints: The Truth About SBA Loan Failure Rates

Few Chem-Dry owners actually use SBA loans, which can make stats misleading.

Entrepreneur magazine has named Chem-Dry a top franchise opportunity for 26 consecutive years.

Entrepreneur magazine has named Chem-Dry a top franchise opportunity for 26 consecutive years.


The United States’ Small Business Association can be a valuable resource for entrepreneurs. Whether they’ve been in business for years or are just starting out, the SBA provides beneficial operations and staffing advice and most notably, financial assistance through small business loans and grants. The majority of potential business owners who seek financial aid through the SBA choose the small business loan option, which means that after applying for the loan, the SBA finds a third party financial institution who is willing to provide the loan while the SBA insures a portion of its repayment.

Though the SBA’s financial assistance has been beneficial to many business owners, it’s not always the best route for potential franchise owners. The SBA’s website notes that “SBA-guaranteed loans may not be made to a small business if the borrower has access to other financing on reasonable terms.” Thus, if an individual qualifies for a traditional commercial loan, or has access to in-house financing from the franchisor, an SBA loan is not an option for them.

Over the years, very few Chem-Dry franchisees have utilized an SBA loan to support their business. According to a report released by the SBA in 2012, less than 35 loans were made to Chem-Dry franchisees from 2001 to 2011. Given the size and annual growth of the Chem-Dry system, that number is remarkably small. However, the SBA’s report also notes that 40%, or roughly 15 of these loans failed. This data has been used by competitors and critics to give the impression that Chem-Dry is not a solid investment; however, we recently spoke with Chem-Dry’s vice president of franchise sales, D’Wayne Tanner, who set the record straight on Chem-Dry’s SBA loan failure rates:

D'Wayne Tanner

D’Wayne Tanner

Do most Chem-Dry owners use SBA loans?
DT: SBA loans are rarely an option for Chem-Dry owners because most of our franchisees use our convenient in-house financing program. We are one of the few franchisors in the industry that provide this option to our franchisees. We believe strongly in the Chem-Dry business model to the point that we put our money behind the brand and the franchisee. As a result, we finance over 95% of our franchise start-ups.

How do the SBA numbers reflect the success of Chem-Dry overall?
DT: With more than 2,000 Chem-Dry franchises in the U.S. alone, these numbers can hardly be considered representative of the entire system. In 2013, Chem-Dry successfully opened 100 new franchises and are on-track to reach 120 in 2014. That’s not because our franchises aren’t succeeding. The past several years have also shown a consistent growth in the average annual income of a franchise owner. I also think it’s important to note that success depends on two factors: No. 1, the power of the brand itself, and No. 2, the franchisee, or partner. We pride ourselves on a very meticulous, yet time-efficient process that allows us to select the best franchisees for our brand. And it works. Over time, Chem-Dry has proven that we have a reliable business model with solid operators who stay with the brand on average over 17 years.

How hard is it to get an SBA loan?
DT: It’s a very timely and tedious process. The SBA actually goes through a third party bank in order to secure the loan, so the applicant is not only waiting on the SBA’s decision, but also an outside financial institution to determine whether or not they are willing to provide the funds. And this is all happening outside of the actual paperwork they’re completing with the franchisor. At Chem-Dry, we recognize how valuable time is for a new franchisee, so our application and approval process takes only a few days and they’re up and running in less than two months.

How does Chem-Dry’s in-house financing work?
DT: It’s actually pretty simple. Once an application is received by our executive team, we process standard background and credit checks, interview the candidate, and then determine an interest rate, ranging from 8-15 percent. From beginning to end, the process, though very thorough, can take as little as three days. Our team is very efficient and works hard to get the franchisee up and operating within a record amount of time.

What would you say to someone considering a Chem-Dry Franchise?
DT: Chem-Dry has been ranked as the No. 1 Carpet Cleaning Franchise by Entrepreneur magazine for 26 consecutive years, and there’s a reason for that. We have the biggest market share in our industry, and our average annual revenue for a franchise owner continues to rise. Our trusted, well-known brand combined with a driven, hardworking entrepreneur is a hard combination to beat.

Interested in starting your own Chem-Dry?

Visit the research pages on our site to learn more about the business, why it has been a success since it started in 1977, equipment packages, start-up costs and average financial performance. You can also find Q&As with Chem-Dry owners and news about the company on our blog.

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