SBA loan basics
Short answer
Yes, an SBA 7(a) loan can be used to purchase a franchise, but the franchise system must be listed on the SBA Franchise Directory or receive SBA approval.
Franchises are a common and eligible use of SBA 7(a) loan proceeds. However, the specific franchise system must be reviewed and approved by the SBA. Many national franchises are pre-approved and listed on the SBA Franchise Directory. If a franchise is not listed, the lender must submit the franchise agreement to the SBA for review and determination of eligibility, ensuring it doesn't violate SBA affiliation or control rules.
A buyer wants to open a new 'Burger Bliss' franchise location. The lender checks the SBA Franchise Directory and confirms 'Burger Bliss' is listed, allowing the loan process to move forward.
Lenders must verify the franchise's eligibility with the SBA. They meticulously review the franchise agreement to ensure no clauses conflict with SBA requirements, especially regarding operational control, which could impact the small business's eligibility.
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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