Buying into a franchise is one of the fastest ways to become a business owner, but the financing side can feel like its own learning curve. This guide walks you through exactly how to finance a franchise with an SBA loan, from the loan types available to the eligibility rules and the steps you'll take to apply. Live Oak Bank is an SBA Preferred Lender, and this guide reflects the SBA’s current SOP 50 10 8.1, effective October 1, 2026, including the franchise eligibility rules established under SOP 50 10 8.

Explore Live Oak’s franchise financing options.

why use an sba loan to finance a franchise?

Franchise financing carries its own set of costs: the franchise fee, buildout, equipment, initial inventory and working capital to get through the early months. Conventional bank loans can cover some of this, but they typically ask for a bigger down payment, shorter repayment terms and a stronger balance sheet than most new franchisees have on day one.

An SBA loan changes that math. Because the SBA guarantees a portion of the loan, lenders can offer a lower down payment. Terms also stretch further, up to 25 years when real estate is involved, which keeps monthly payments manageable while your franchise builds momentum.

Rates matter too. With SBA loans, the lender sets the rate, and it can be more competitive than what you'd find with a conventional franchise loan, especially for borrowers who don't yet have years of business credit history. Put together, a lower down payment, a longer runway, and a rate that can be more competitive are exactly why so many franchisees turn to an SBA loan for franchise financing rather than going the conventional route.

sba 7(a) small loan and sba 504: which loan fits your franchise?

When a 7(a) loan alone isn't enough to cover the full project cost, Live Oak Bank can also structure a conventional loan alongside the SBA financing to bridge the gap.¹

is your franchise eligible for an sba loan?

Not every franchise concept automatically qualifies. Eligibility comes down to your personal credit and industry experience, along with whether your specific franchise brand meets SBA affiliation rules. The SBA Franchise Directory lists approved brands. Our guide to the SOP 50 10 8 explains the revised eligibility requirements.

How to get an sba loan for your franchise

Getting a business loan for franchise financing follows a fairly predictable path. Here's what it looks like from start to finish:

1. Research your franchise options. Compare franchise brands, industries, and territories, and confirm the concept you're interested in is listed on the SBA Franchise Directory.
2. Prepare a business plan. Outline your target market, projected revenue, staffing plan and how you intend to use loan proceeds.
3. Assess your financial situation. Review your personal credit, available cash for a down payment and any collateral you can bring to the table.
4. Gather your documents. Tax returns, financial statements and franchise disclosure documents are all standard requests.
5. Choose the right SBA loan type. Decide between a 7(a), 7(a) Small Loan, or 504 loan based on your total project cost and what you're financing.
6. Find an SBA Preferred Lender. Working with a lender that specializes in franchise loans for your industry speeds up underwriting and reduces back-and-forth.
7. Complete the application. Submit your business plan, financials, and franchise paperwork through your lender's process.
8. Submit required documentation and close. Respond to underwriting requests promptly so your loan can move to approval and funding without delay.
   

What Can an SBA Franchise Loan Be Used For?

An SBA franchise business loan is built to cover the full cost of getting your location open and operating, not just the franchise fee. Common uses include:

• Franchise acquisition: covering the initial franchise fee and any associated licensing costs.
• Commercial real estate: purchasing or constructing the building your franchise will operate from.
• Equipment: funding equipment, machinery, fixtures, or technology specific to your franchise brand.
• Working capital: covering payroll, inventory, and day-to-day operating costs while your location ramps up.
• Buildout and renovation: paying for tenant improvements or brand-required renovations.
• Refinancing: consolidating existing high-interest franchise business loans into a single SBA-backed loan with better terms.

Frequently asked questions about sba franchise loans

What is an SBA franchise loan?

An SBA franchise loan is a small business loan partially guaranteed by the U.S. Small Business Administration, used specifically to fund the purchase, buildout or operation of a franchise location.

What are the benefits of getting an SBA loan for a franchise?

Lower down payments, longer repayment terms, and competitive rates make an SBA loan more accessible than most conventional franchise business loans, particularly for first-time franchisees.

Am I eligible for an SBA franchise loan?

Eligibility depends on your personal credit, industry experience, and available collateral, as well as whether your franchise brand is listed on the SBA Franchise Directory.

Which franchises are eligible for SBA loans?

Franchise brands must be reviewed and listed on the SBA Franchise Directory under current SOP 50 10 8 guidelines. Not every brand qualifies, so it's worth confirming before you apply.

How much can I borrow with an SBA franchise loan?

Loan amounts depend on the program: up to $350,000¹ for a 7(a) Small Loan, up to $5 million¹ for a standard 7(a) loan, and up to $5.5 million¹ for an SBA 504 loan.

How long does the SBA loan application process take?

Timelines vary by lender and how complete your documentation is, but working with an experienced SBA Preferred Lender typically speeds up underwriting and funding.

What documents do I need for an SBA franchise loan application?

Expect to provide tax returns, personal and business financial statements, your franchise disclosure document, and a business plan outlining how you'll use the loan.

Can I refinance existing franchise debt with an SBA loan?

Yes. Many franchisees use an SBA loan to refinance higher-rate franchise business loans into a single loan with a lower rate and longer term.

Ready to finance your franchise?

An SBA loan gives you the down payment flexibility, extended terms, and competitive rate you need to open your franchise on solid footing. As an SBA Preferred Lender with deep franchise financing experience, Live Oak Bank can help you find the right loan structure for your concept and walk you through every step of the process. Explore Live Oak's franchise financing options to get started.

1. Your interest rate, terms and speed to receive funds differ based on your creditworthiness, industry and other factors.