SBA loan basics
Short answer
Yes, an SBA 7(a) loan can be used to pay for initial franchise fees, as well as ongoing fees, provided the franchise is approved by the SBA and listed on the SBA Franchise Directory.
SBA 7(a) loans are a common financing tool for franchises. The loan can cover the initial franchise fee, which is often a significant upfront cost, as well as other eligible expenses like equipment, inventory, working capital, and real estate for the franchise location. For eligibility, the franchise agreement must comply with SBA requirements, and most established franchises are pre-approved and listed on the SBA Franchise Directory.
An entrepreneur wants to open a new fast-food franchise location that requires a $40,000 initial franchise fee and $300,000 for build-out and equipment. An SBA 7(a) loan can be structured to include the $40,000 franchise fee along with the other costs, assuming the franchise is on the SBA's approved list.
Insider move
Lenders verify that the franchise is listed on the SBA Franchise Directory and that the franchise agreement complies with SBA regulations. They carefully review the franchise model's viability and the franchisee's experience.
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 2026-06-14. 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.
More on what it can be used for
Terms in this answer
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