Access up to $5 million with government-backed SBA loans. Lower rates, longer terms, less down payment required.
Up to $5M for franchise purchases, working capital, and expansion
Real estate and equipment financing with 10% down payment
Up to $50K for smaller franchise investments and working capital
Calculate your monthly payments for SBA 7(a), 504, and microloan programs
Calculate payments for SBA 7(a), 504, and microloan programs with fees included
Connect with experienced SBA lenders who specialize in franchise financing. Get pre-qualified and compare multiple offers.
As low as 10% down vs 20-30% for conventional loans
Up to 25 years for real estate, 10 years for equipment
Up to 85% government guarantee reduces lender risk
Up to $5M for 7(a) loans, $5.5M for 504 programs
| Feature | SBA 7(a) | SBA 504 | Microloans |
|---|---|---|---|
| Maximum Amount | $5,000,000 | $5,500,000 | $50,000 |
| Down Payment | 10-15% | 10% | Varies |
| Interest Rate | Prime + 2.75-4.75% | Prime + 2-3% | 8-13% |
| Term Length | Up to 25 years | 10-20 years | Up to 6 years |
| Best For | Working capital, equipment, franchise fees | Real estate, major equipment | Small franchises, inventory |
An SBA (Small Business Administration) loan is a government-backed loan program designed to help small businesses access affordable financing. For franchises, SBA loans are particularly valuable because they offer lower down payments (10-15% vs 20-30% conventional), longer repayment terms, and competitive interest rates. The SBA guarantees 75-85% of the loan, reducing risk for lenders and making approval easier for franchise owners.
Yes, SBA loans are excellent for franchise purchases. You can use SBA 7(a) loans to finance franchise fees, working capital, equipment, and even real estate. However, the franchise must be listed on the SBA Franchise Directory. Most major franchises like McDonald's, Subway, and UPS Store are pre-approved, streamlining the application process.
SBA loan rates are tied to the Prime Rate plus a margin. As of 2024, typical rates are: SBA 7(a) loans range from Prime + 2.75% to Prime + 4.75% depending on loan size and term. SBA 504 loans typically run Prime + 2% to Prime + 3%. Microloans range from 8-13%. Rates change with market conditions, so current quotes are essential.
SBA loan approval typically takes 30-90 days for franchises. The timeline depends on loan complexity, borrower preparedness, and lender efficiency. Franchises on the SBA Directory often process faster (30-45 days) due to pre-approval. Express loans can be approved in 36 hours but have lower limits. Working with experienced SBA lenders can significantly reduce processing time.
SBA 7(a) loans are the most flexible SBA program. You can use them for: franchise fees and startup costs, working capital and inventory, equipment and machinery, business acquisition, debt refinancing, and even owner-occupied real estate (up to 60% of loan amount). They cannot be used for passive investments, lending to others, or speculative activities.
The maximum SBA 7(a) loan amount is $5 million. However, most franchise purchases range from $150,000 to $2 million depending on the franchise brand and location. The SBA guarantees up to 85% for loans under $150,000 and 75% for larger amounts. Your eligibility depends on creditworthiness, cash flow, and collateral.
Collateral requirements vary by loan size. For loans under $25,000, collateral may not be required. For loans $25,000-$350,000, collateral is required if available without causing undue hardship. For loans over $350,000, collateral equal to the loan amount is typically required. Business assets, real estate, and personal guarantees are common forms of collateral.
Choose SBA 504 loans for major fixed asset purchases like real estate or expensive equipment. The 504 program offers lower down payments (10% vs 15-25%), longer terms (10-20 years), and potentially lower rates. It's ideal for franchise owners buying their building or investing in major kitchen equipment, manufacturing machinery, or technology infrastructure.
SBA 504 loans have a unique three-part structure: You contribute 10% down payment, a bank provides 50% as a first mortgage, and a Certified Development Company (CDC) provides 40% as an SBA debenture. The CDC portion has a fixed rate for 10 or 20 years. This structure often results in lower overall borrowing costs compared to conventional financing.
SBA 504 loans require job creation or retention. You must create or retain one job for every $75,000 of SBA funding (or $100,000 in targeted areas). For a $1 million project, you'd need to create/retain about 13 jobs. Manufacturing businesses have more favorable ratios. Jobs must be created within two years and maintained for the loan term.
Most SBA lenders require a minimum credit score of 680-700, though some accept scores as low as 640. Higher scores (750+) get better rates and terms. The SBA doesn't set credit score requirements, but individual lenders do. If your score is below 680, consider improving it before applying or working with lenders who specialize in lower credit scores.
SBA loan down payments are typically 10-15%, significantly lower than conventional loans (20-30%). For SBA 7(a) loans, expect 10-15% down. SBA 504 loans require only 10% down. The exact amount depends on your creditworthiness, the franchise, and loan purpose. Some lenders may require higher down payments for riskier borrowers or industries.
Required documents include: personal and business tax returns (3 years), personal financial statement, business plan and cash flow projections, franchise disclosure document (FDD), franchise agreement, bank statements (3 months), resume and business experience, legal documents (articles of incorporation, etc.), and collateral documentation. Preparation is key to faster approval.
Yes, but it's more challenging. The SBA and lenders prefer borrowers with relevant business or management experience. However, franchises are viewed favorably because they provide training and proven business models. Strong financial qualifications, a solid business plan, and choosing a franchise with comprehensive training can overcome limited experience. Some lenders specialize in first-time business owners.
The SBA loan process: 1) Prepare documentation and business plan, 2) Choose and apply with an SBA preferred lender, 3) Lender reviews and underwrites your application, 4) Lender submits to SBA for guarantee approval, 5) SBA reviews and approves/declines, 6) Final loan documentation and closing, 7) Funding disbursement. Working with experienced SBA lenders and having complete documentation accelerates the process.
Yes, several strategies can accelerate approval: choose franchises on the SBA Directory for streamlined processing, work with SBA Preferred Lenders who have delegated authority, prepare complete documentation upfront, maintain strong credit and financials, consider SBA Express loans for smaller amounts, and hire experienced professionals (accountants, attorneys) to ensure proper preparation.
If denied, understand the specific reasons and address them. Common issues include insufficient cash flow, poor credit, inadequate collateral, or incomplete documentation. You can reapply after addressing concerns, try different lenders (each has different criteria), consider alternative financing, or work with an SBA loan consultant. Many initially denied applications are eventually approved after corrections.
SBA loan fees include: SBA guarantee fee (0.25-3.75% of guaranteed portion), lender processing fees (varies by lender), packaging fees if using a broker ($2,500-$15,000), legal and professional fees ($2,000-$10,000), appraisal and environmental fees ($1,000-$5,000), and ongoing servicing fees. Total fees typically range from 2-6% of loan amount.
Most SBA loan fees are tax deductible as business expenses. The SBA guarantee fee, legal fees, appraisal costs, and other loan-related expenses can typically be deducted. However, some fees may need to be amortized over the loan term rather than deducted immediately. Consult with a tax professional to ensure proper treatment of loan fees on your tax returns.
Yes, most SBA loan fees can be financed into the loan amount, reducing your out-of-pocket costs at closing. This includes the SBA guarantee fee, some lender fees, and third-party costs like appraisals. However, financing fees increases your total loan amount and monthly payments. Some lenders may require certain fees to be paid upfront.
Franchises must be listed on the SBA Franchise Directory to qualify for streamlined processing. This includes most major brands like McDonald's, Subway, 7-Eleven, UPS Store, and thousands of others. The directory indicates which franchises are eligible and any special requirements. Non-listed franchises can still qualify but require additional SBA review and documentation.
Yes, SBA loans can finance multiple franchise locations, either simultaneously or over time. You can structure one loan for multiple units or separate loans for each location. Multi-unit development often requires larger loan amounts, stronger financials, and detailed expansion plans. Some franchisors offer incentives for multi-unit development that can strengthen your SBA loan application.
Franchise royalties and fees are considered in cash flow analysis but don't disqualify you from SBA loans. Lenders evaluate your ability to service debt after all franchise obligations. Higher royalty rates may require stronger initial cash flow, but established franchises often have proven revenue models that offset this concern. Include all franchise costs in your financial projections.
Yes, SBA loans can refinance existing franchise debt under certain conditions. The refinancing must provide substantial benefit like lower payments, improved cash flow, or debt consolidation. You cannot refinance seller financing or SBA debt with another SBA loan. The business must have operated successfully for at least two years, and the new loan terms must improve your financial position.