Franchise SBA loans: rates, down payment and eligibility
Franchises · NAICS varies by brand · Program that usually fits: 7(a)
A franchise SBA loan works like any other 7(a) loan, with one extra check: the brand has to be listed on the SBA Franchise Directory, which the SBA brought back in June 2025. If the franchisor is on the list, the lender can move straight to your numbers. If it isn't, the franchisor has to get its agreement reviewed first, and that can add weeks.
Who qualifies
You qualify the same way any other borrower does: a for-profit business, an owner with reasonable credit, and a plan that shows the unit can cover the loan payment. Lenders like franchises because the franchisor's Item 19 financial performance data gives them real numbers to underwrite against, and because the brand has already worked out the operating model.
Which SBA program fits
7(a) for most new units
Covers the franchise fee, build-out, equipment, opening inventory and working capital in one loan, up to $5 million. Terms run 10 years for most of it, 25 years if real estate is included.
SBA Express for small fees
For loans under $500,000 some lenders use Express, which is faster but carries a lower SBA guarantee, so expect a slightly higher rate.
504 when you buy the building
If you're buying the site, a 504 loan funds the real estate at a fixed rate and the 7(a) covers everything else.
What borrowers use the money for
- Initial franchise fee and training costs
- Leasehold build-out and signage to brand standards
- Equipment and point-of-sale systems
- Opening inventory and the first months of payroll
- Buying an existing franchised unit from a retiring owner
Typical loan amounts, down payment and terms
Most first-unit franchise loans fall between $150,000 and $1 million. Lenders usually ask for 10% to 20% equity injection, and more for a first-time owner with no industry experience. Resale units often need less equity because there's an operating history to lend against.
Example: a $350,000 loan
At today's maximum variable 7(a) rate of 10.00% over 10 years, the payment would be about $4,625 a month. Most well-qualified borrowers get a lower rate. Try your own numbers.
Today's rate caps
These are the SBA's maximum 7(a) rates with prime at 7.00%. See current SBA 7(a) rates and SBA 504 rates for the full picture.
| Loan amount | Maximum spread | Maximum variable rate today |
|---|---|---|
| $50,000 or less | Prime + 6.5 | 13.50% |
| $50,001 to $250,000 | Prime + 6.0 | 13.00% |
| $250,001 to $350,000 | Prime + 4.5 | 11.50% |
| Over $350,000 | Prime + 3.0 | 10.00% |
Related industries and lenders
Related industries
SBA lenders active nationwide
Questions about franchise SBA loans
Can I get an SBA loan for a franchise?
Yes. Franchises are among the most common 7(a) uses. The brand must appear on the SBA Franchise Directory, and you must meet the same credit, equity and cash-flow tests as any other borrower. Lenders that specialize in franchise lending can often approve a listed brand in a few weeks.
How much down payment does a franchise SBA loan need?
Plan on 10% of total project costs as a minimum, and 15% to 20% if this is your first business or the brand is new. The equity can come from savings, a gift, or a retirement rollover, but not from another loan secured by the business.
What credit score do I need for a franchise SBA loan?
Most SBA lenders look for a personal score of 680 or higher, and some will go lower when the franchisor's unit economics are strong. Your SBSS small-business score also matters for loans under $350,000.
What is the interest rate on a franchise SBA loan?
Lenders set their own rate under the SBA cap. With prime at 7.00%, the cap is 10.00% for loans over $350,000 and up to 13.50% for the smallest loans. Franchise borrowers with good credit commonly see prime plus 2 to 3 points.
Which franchises does the SBA approve?
Any brand on the SBA Franchise Directory. The directory lists franchisors whose agreements the SBA has reviewed. If your brand isn't listed, ask the franchisor to apply; many do once a prospective owner asks.
Sources: SBA 7(a) terms, conditions and maximum variable rates; Federal Reserve H.15 selected interest rates (bank prime loan rate); October 2026 SBA 504 debenture pricing, as published by CDCs; SBA FOIA 7(a) and 504 loan-level data.