How to Get an SBA Loan to Finance a Franchise

If you’re ready to open, buy or expand an existing franchise but don’t have enough cash on hand, an SBA loan may help bridge the gap. SBA loans are partially guaranteed by the U.S. Small Business Administration and issued by participating lenders, typically banks and credit unions.

To qualify, you’ll need to meet strict lending criteria. Your franchise must also be included in the SBA Franchise Directory to be eligible for financing

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U.S. Small Business Administration. SBA Franchise Directory. Accessed Oct 15, 2026. View all sources .

SBA franchise loan options

Business owners can generally choose between two SBA loan options to finance their franchise — SBA 7(a) loans and SBA 504 loans.

SBA 7(a) loans

SBA 7(a) loans are the most common type of SBA loan and can be used for a wide range of purposes, such as working capital, equipment or supplies purchases, and business expansions or renovations.

SBA 504 loans

SBA 504 loans are administered by certified development companies (CDCs) and partially backed by the SBA. Unlike 7(a) loans, however, funding for 504 loans comes from three different places:

• A certified development company.

• A third-party lender, usually a bank or credit union.

• The business owner’s portion.

SBA 504 loans can only be used for specific purposes, including equipment, land and real estate purchases. You can also use one to improve land, streets, utilities, parking lots and existing facilities.

That means you can’t use a 504 loan as an acquisition loan to buy a franchise. It also can’t cover franchise fees, working capital, inventory purchases or consolidating, refinancing or repaying debt.

SBA franchise loans, compared

Here’s how SBA 7(a) and 504 loans compare for franchise financing.

» MORE: Compare the best franchise financing options

How to get an SBA loan for your franchise

To get an SBA loan for your franchise, you’ll need to confirm your business is eligible for financing, find a lender and submit an application.

1. Check your business’s qualifications

SBA requirements

To qualify for an SBA loan, you’ll first need to meet the SBA’s general loan requirements.

For example, you must:

• Run a for-profit business based in the U.S.

• Meet the SBA definition of a small business.

• Operate in an SBA-approved industry.

• Not qualify for funding on reasonable terms elsewhere.

Depending on the type of SBA loan you choose, you may also need to meet program-specific requirements. For example, for 504 loans, you’ll need to create or retain one job for every $95,000 guaranteed by the SBA.

Lender requirements

Lenders layer their own requirements on top of the SBA’s baseline. For example, most SBA franchise lenders require a credit score of 680 or higher.

You’ll also need to demonstrate your ability to repay the loan. Lenders may weigh different factors depending on where you are in your franchisee journey:

• If you’re opening up a new franchise, come prepared with detailed and realistic financial projections showing how you’ll make enough money to pay back the debt. 

• If you’re buying an existing franchise or you already own one, the lender may rely more on the business’s past revenue as the key marker for your ability to repay.

If you’re not already a business owner, lenders also like to see relevant management or industry experience that shows you have what it takes to run the business.

Some SBA lenders list their qualification requirements online, but speaking with a loan officer can give you a clearer picture of where you stand before you apply. A reputable business loan broker or marketplace, like NerdWallet Small Business, can also help you explore options.

2. Make sure your franchise is eligible

Franchise businesses must meet an additional requirement to be eligible for SBA financing. You’ll need to use the SBA Franchise Directory and confirm that your franchise is one of the 3,401 listed. If your franchise is not listed, you won’t be eligible for funding.

To get your franchise added to the directory, you’ll need to work with your franchisor to submit the appropriate paperwork for review by the SBA Franchise Team.

3. Choose a lender

The right SBA lender for your franchise will depend on a number of factors, starting with whether you want a 7(a) or 504 loan. In general, you’ll want to look for an SBA lender with an established history of issuing loans, a streamlined application process and dedicated loan specialists.

You might start your search by contacting a bank or credit union where you have an existing relationship and talking to a business representative about its SBA loan options. You can also use the SBA Lender Match tool, where you answer a few questions about your business. Within two business days, you’ll get a list of possible lender matches.

Before you choose a lender, ask questions about loan terms, interest rates and qualification requirements. You can also ask about the application process and funding timeline to help you determine whether the lender is a good fit for your needs.

4. Gather your documents and submit your application

Your SBA loan application requirements can vary based on your lender and loan type. Typically, however, you’ll be asked to provide:

• Borrower information form, also known as SBA Form 1919.

• A personal financial statement, also known as SBA Form 413.

• A statement of personal history, also known as SBA Form 912.

• Business financial statements, such as income statements, balance sheets and cash flow projections.

• Income tax returns.

• Detailed schedule of collateral.

• Existing debt schedule, if applicable.

• Business certificates or licenses.

• Loan application history.

• Resumes for each business owner.

• Business overview and history.

• Business lease.

• SBA unconditional personal guarantee from anyone with 20% or more ownership in the business.

As a franchise business, you’ll need to provide your franchise agreement as part of the application. The SBA Franchise Directory will indicate if you also need to include SBA Form 2462 (Addendum to Franchise Agreement).

Once you’ve submitted your application, funding can take anywhere from 30 days to a couple of months.

» MORE: How to apply for an SBA loan

Alternatives to SBA franchise loans

If you can’t qualify for an SBA franchise loan, or simply want to explore other options, here are a few choices to consider.

Franchisor financing

You might be able to work directly with your franchisor to get financing for your business. Depending on the brand, your franchisor may offer standard business loans, discounts on franchise fees or other incentives.

The UPS Store, for example, works with third-party lenders to help its franchisees access funding. It also offers franchise fee discounts for qualifying veterans and first responders buying their first franchise, as well as discounts for other first-time buyers.

Short-term business loans

Online lenders can offer short-term business loans if you need a smaller loan amount or faster funding. These loans usually have repayment terms of one year or less, although some lenders may offer terms of up to 18 or 24 months.

Short-term loans can be a good option for a wide range of purposes, including working capital, cash flow gaps or taking advantage of a new business opportunity for your franchise.

And unlike SBA loans, short-term lenders generally have flexible qualification requirements and streamlined applications with minimal documentation. Some short-term loans can fund in as little as 24 hours.

These loans can be expensive, however, with interest rates ranging anywhere from 10% to 99%.

Equipment financing

If you need equipment for your franchise, but can’t qualify or need faster financing than an SBA loan, an equipment loan can be a good option.

Equipment financing allows you to get a loan equal to up to 100% of the value of the equipment you’re looking to purchase (depending on the lender and your business’s qualifications). Repayment terms on equipment financing are typically based on the anticipated life of the equipment you’re purchasing.

Because the equipment you purchase serves as collateral on the loan, equipment financing can be easier to qualify for than other types of business loans. You may not need to rely as heavily on standard criteria, such as your personal credit, time in business or other collateral when applying.

You can get equipment financing from both banks and online lenders. Banks offer the most competitive rates and terms but also have strict requirements and are slow to fund. Online lenders may charge higher interest rates than banks but generally offer simpler applications and faster access to financing.

» MORE: Franchising: advantages, disadvantages and how to buy a franchise

Frequently Asked Questions