SBA 7(a) Q&A
Short answer
No, initial franchise fees and ongoing royalties are generally eligible uses of SBA 7(a) loan proceeds, as they are part of the legitimate costs of acquiring a franchise.
The SBA permits 7(a) loan funds to be used for reasonable and necessary costs associated with starting or acquiring a franchise. This includes the one-time initial franchise fee paid to the franchisor and, indirectly, working capital to cover initial royalty payments.
If an initial franchise fee is $40,000, that amount can be directly included in the SBA 7(a) loan request. Similarly, funds for the first few months of royalty payments, if structured as part of working capital, are also eligible.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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