The Ultimate Guide To SBA Franchise Loans

Franchisees that need extra funding for their franchise business can look to low-interest SBA loans. Find out which SBA loans are best for franchises and whether you qualify.

WRITTEN & RESEARCHED BY
Erica Seppala
Editor & Senior Staff Writer

Last updated onUpdated March 21, 2026

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Key Takeaways

SBA loans offer competitive rates and flexible terms, making them a great option for financing new or growing franchises.
There are three main types of SBA loans most suitable for franchises: Standard 7(a), SBA Express, and CDC/504.
To apply, you must have a strong credit score, own a for-profit business in the U.S., and meet size standards set by the SBA. You must also be prepared to wait 90 days or longer to get funded.

Whether you’re starting a new franchise or growing an existing one, an SBA franchise loan can be a helpful tool. If eligible, franchises can enjoy the flexibility and low rates of a small business loan backed by the SBA.

Keep reading to learn more about SBA loans for franchises and if these loans are the right funding option for your business.

Table of Contents

What Are SBA Loans For Franchises?
Types Of SBA Loans For Franchises
SBA Franchise Loan Eligibility Requirements
How To Apply For An SBA Franchise Loan
Alternatives To SBA Franchise Loans
The Bottom Line On SBA Franchise Loans

What Are SBA Loans For Franchises?

The Small Business Administration is a federal government agency that supports small businesses with resources like educational materials, training, and small business loan programs.

SBA loans are popular with small business owners due to their competitive rates and terms. Many small businesses, including franchises, are eligible for these funding opportunities.

The SBA itself doesn’t distribute funds to businesses. Loans are funded by SBA-approved intermediary lenders like banks, credit unions, and nonprofit organizations. What the SBA does is guarantee a large portion of each loan. By guaranteeing that most of the loan will be paid for even if the borrower defaults, lenders take on less risk and are more likely to fund small businesses.

What this means is that businesses and franchises that can’t find funding elsewhere may be eligible for a low-interest, long-term loan to use for expenses like equipment, business expansion, or even acquiring a new business.

Types Of SBA Loans For Franchises

There are three types of SBA loans that work for franchises: the Standard 7(a) loan, the SBA Express loan, and the CDC/504 loan.

SBA Standard 7(a) Loans For Franchises

The SBA Standard 7(a) loan is one of the most popular and versatile SBA loan programs. Loans up to $5 million are available and can be used for nearly any business purpose, including:

Supplies
Inventory
Working capital
Business acquisition
Refinancing high-interest debt
Commercial real estate

The SBA has set repayment terms that keep the Standard SBA 7(a) loan extremely competitive. Maximum repayment terms are the prime rate plus a markup. This markup is determined by the borrowing amount and the length of the loan.

Loan Amount	Less Than 7 Years	More Than 7 Years
Up to $25,000	Base rate + 4.25%	Base rate + 4.75%
$25,000-$50,000	Base rate + 3.25%	Base rate + 3.75%
More than $50,000	Base rate + 2.25%	Base rate + 2.75%

Repayment terms are up to 25 years for real estate purchases and up to 10 years for all other purposes.

SBA Express Loans For Franchises

Another loan that falls under the 7(a) umbrella is the SBA Express loan. This loan is very similar to the Standard 7(a) loan with a few notable differences.

The SBA Express loan program offers a maximum of $500,000. It can be used for nearly any business, just like the Standard 7(a) loan. Interest rates are set by the SBA and are slightly higher than Standard 7(a) loans but are still competitive. Maximum rates are the prime rate plus a maximum 6.5% markup.

What makes this loan stand out is that an approval decision is guaranteed within 36 hours, compared to 5-10+ business days with the Standard 7(a) loan. While an approval decision is made quickly, processing, underwriting, and funding may take 30-90+ days for the Express loan.

SBA CDC/504 Loans For Franchises

SBA 504/CDC Loans provide up to $5 million for commercial real estate purchases, although some projects may be eligible for $5.5 million. Funds can be used for:

New construction
Improvements to existing buildings
Land
Long-term fixed equipment and machinery

These loans work a little differently than other SBA programs because two lenders are involved. Here’s how funding works:

A Certified Development Company (CDC) provides up to 40% of project costs
A third-party lender (such as a bank or credit union) provides up to 50% of project costs
The borrower pays at least 10% of project costs

SBA 504 loans are fixed-rate loans. Interest rates are based on U.S. Treasury rates. Repayment terms up to 25 years are available.

SBA Franchise Loan Eligibility Requirements

The first step in the SBA application process is to determine if your franchise is eligible for a loan. Then, you can determine if you meet all other requirements of the lender and the SBA.

Franchises That Are Eligible For SBA Loans

The SBA maintains a Franchise Directory listing all brands eligible for SBA financial assistance. If your franchise meets the FTC definition of a franchise, it must be listed in the directory to qualify for SBA financing. Lenders use the directory to verify eligibility, which simplifies the process for borrowers operating under well-known franchise brands.

Franchisors must complete an annual certification to remain listed on the SBA Franchise Directory. If a brand is removed from the directory, franchisees operating under that brand will no longer be eligible for new SBA financing.

SBA Loan Eligibility Requirements For Franchisees

Once you’ve determined that your franchise is eligible for a franchise loan, you — the franchisee — will also need to meet certain requirements set by the lender and the SBA.

The SBA has basic guidelines that all borrowers must meet. To receive an SBA loan, you must:

Operate a for-profit business
Engage in business or plan to engage in business in the United States or a U.S. territory
Meet the size standards of a small business as defined by the SBA
Have had to exhaust all other means of funding before seeking an SBA loan
Show that you have the means to repay the loan
Have a business in an eligible industry

The ideal borrower has an acceptable business history with a franchise of at least two years. Lenders want to know that your franchise will be a success, so the more successful locations your business already has, the better. Popular franchise types include retail, fitness, daycare, food service, and hospitality.

Personal Credit Requirements For SBA Franchise Loans

There are no specific personal credit requirements for SBA franchise loans. However, it is mandatory that you have a strong credit score with a solid credit history. Generally, it is recommended to have a personal credit score of at least 680 to qualify for an SBA loan.

You will need to explain negative items like missed payments or collections to your lender. Certain negative items, including recent bankruptcies, foreclosures, and defaulted government loans, will make you ineligible for an SBA loan.

Collateral Requirements For SBA Franchise Loans

For most SBA loans, collateral is required in the form of business assets. In some cases, personal real estate may be used as collateral.

All owners with at least a 20% stake in the business must also sign a personal guarantee. This makes borrowers personally liable for the debt if they default on the loan.

How To Apply For An SBA Franchise Loan

Once your lender has determined that your franchise is eligible for an SBA loan, the application process is the same as it is for other businesses.

If you haven’t found a lender yet, you can use the SBA’s Lender Match service to find an SBA-approved lender in your area. You can also ask for a referral from your financial institution. There are also online brokers and lenders like SmartBiz and Lendio that can help you get an SBA loan.

During the application process, you will be required to provide information about yourself, other owners, and your business. You will need to choose which loan you’d like to receive, choose your borrowing amount, and explain your purpose for the loan.

Your loan package that will be submitted to the SBA will include your application as well as documentation like:

Franchise agreement
Business licenses and permits
Personal financial statements
Resumes for all owners
Federal income tax returns
Balance sheets
Profit and loss statements
Cash flow projections
Schedule of collateral
Business leases

If you are applying for the 504 loan, you will need to provide a letter of intent from the third-party lender that explains why the lender is unable to fund the entire project.

Your lender can provide details on additional documentation requirements.

Your credit score and history will be checked to determine if you qualify for the loan. Additionally, the lender will view your financial documentation to ensure that your business is financially sound and able to repay the loan.

If you meet all requirements, your package will be processed, loan underwriting will begin, and funds will be disbursed. The entire SBA loan application process generally takes 30 to 90 days from start to finish.

Alternatives To SBA Franchise Loans

There may be circumstances when an SBA franchise loan isn’t right for your business, such as:

You don’t meet the basic SBA requirements
You need fast funding
You have bad credit
Your franchise is ineligible

Fortunately, there are many alternatives to SBA loans, including:

Installment loans
Short-term loans
Lines of credit
Equipment financing
Invoice factoring

With a little research, you can find the best franchise loan to meet the unique needs of your business.

The Bottom Line On SBA Franchise Loans

SBA loans for franchises can provide the capital you need to grow your business. While the process can be time-consuming and difficult, the low interest rates and long repayment terms can help you take your franchise to the next level.

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Erica Seppala

Editor & Senior Staff Writer at Merchant Maverick

Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.

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