SBA Loans for Franchise Buyers: What You Need to Know

SBA 7(a) loans are the most common way Americans finance a franchise. The SBA partners with banks to guarantee a portion of the loan, which makes lenders willing to underwrite borrowers who wouldn't qualify for conventional financing.

Eligibility Basics

Your franchise must appear on the SBA Franchise Directory, you'll need 10–15% equity injection, credit score of 680+, and 18 months of post-close working capital. Personal guarantee is required from anyone owning 20%+.

The Underwriting Process

Expect 60–90 days from application to funding. The lender will review three years of personal tax returns, business plan, debt schedule, projections, and the franchisor's Item 19. Top lenders specialize in franchise concepts and move faster.

Choose Your Lender Carefully

Not every bank wants franchise loans. SBA Preferred Lenders with franchise specialty desks process faster, ask better questions, and close more deals. Ask the franchisor for their preferred lender list.

What to Avoid

Don't apply with multiple banks simultaneously — credit pulls compound. Don't structure your own deal — let the franchise lender package it. Don't borrow against retirement accounts without exploring ROBS first.