Franchises are a popular use of SBA financing. A proven brand and a tested business model make lenders comfortable, which can make a franchise easier to finance than an independent startup.
The SBA Franchise Directory
The key first step is eligibility. The SBA maintains a Franchise Directory of brands reviewed for SBA loan eligibility. If your franchise brand is on the directory and in good standing, it is generally eligible for SBA financing; if it is not, a lender may not be able to use an SBA loan. Ask your lender to confirm your brand’s status early.
What lenders look at
- The brand’s track record. Established franchises with healthy unit economics are viewed favorably.
- Your experience and credit. Lenders want an owner who can run the unit and who has acceptable credit.
- The total project cost. Franchise fees, build-out, equipment, and working capital all factor in.
- Your equity injection. Plan for a down payment, often around 10%.
7(a) or 504?
Most franchise financing runs through the flexible 7(a) program, which can cover the franchise fee, build-out, equipment, and working capital. If a big part of the deal is owner-occupied real estate, a 504 loan may fit alongside it.
Steps
- Confirm the brand is eligible and you meet the basic requirements.
- Build your project budget.
- Match with a lender experienced in franchise lending via Lender Match.
- Work through underwriting and closing; see the application walkthrough.
Eligibility and terms follow the current SBA rules and vary by lender and brand, so confirm specifics before you commit.