SBA loan basics
Short answer
Yes, an SBA 7(a) loan can be used to purchase a franchise, whether it's a new franchise location or an existing one. The franchise must be on the SBA's Franchise Directory or be reviewed and approved by the SBA.
Franchises are generally eligible for SBA 7(a) financing if they meet all other eligibility criteria. The SBA maintains a Franchise Directory to streamline the approval process for common franchise agreements. If a franchise is not listed, the lender must submit the franchise agreement for SBA review to ensure it does not include affiliation or control clauses that violate SBA regulations.
John wants to open a new coffee shop under a popular franchise brand. He can use an SBA 7(a) loan to finance the franchise fee, equipment, leasehold improvements, and initial working capital, provided the franchise is registered or approved by the SBA.
Insider move
Lenders verify the franchise's eligibility through the SBA Franchise Directory or by submitting the franchise agreement for review, ensuring there are no problematic clauses that could jeopardize the guaranty.
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 2026-06-13. 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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