SBA loan basics
Short answer
Yes, an SBA 7(a) loan can be used to purchase an eligible franchise business, including acquiring an existing franchise location or opening a new one.
The SBA has specific requirements for franchise eligibility. The franchise must be listed on the SBA Franchise Directory, or if not, the franchise agreement must be reviewed by the SBA to ensure it does not contain terms that restrict the franchisee's ability to operate independently or pledge assets. The loan can finance the franchise fee, equipment, leasehold improvements, and working capital.
A borrower wants to buy an existing fast-food franchise location for $400,000. If the franchise system is on the SBA Franchise Directory, an SBA 7(a) loan can be used to finance the acquisition, including the franchise transfer fee, equipment, and working capital.
Insider move
Lenders must verify the franchise's eligibility through the SBA Franchise Directory or by submitting the franchise agreement for review. They ensure that the franchise agreement complies with SBA rules, particularly regarding the franchisee's control over the business.
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
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. 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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