SBA loan basics
Short answer
Yes, an SBA 7(a) loan can be used to purchase a new or existing franchise business, including the initial franchise fees, equipment, and working capital. The specific franchise must be approved by the SBA.
Funds from a 7(a) loan can be used for business acquisition, which includes the purchase of a franchise. The SBA maintains a Franchise Directory of approved franchise systems. If a franchise is not on this list, the lender must submit the franchise agreement to the SBA for review and eligibility determination.
Maria wants to open a new coffee shop under a popular franchise brand. She can use an SBA 7(a) loan to cover the franchise fee, leasehold improvements for her store, purchase new espresso machines, and secure initial working capital to get the business running.
Insider move
Lenders must verify the franchise is SBA-approved or submit the franchise agreement for review. They also assess the borrower's experience and the financial viability of the specific franchise location and market.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
SBA 7(a) Loans Overview
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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