Based on FranchiseStack analysis of SBA franchise lending data and FDD financial requirements, SBA 7(a) loans are the most common financing vehicle for franchise acquisitions in the $100K-$2M range. The program guarantees 75-85% of the loan amount to participating lenders, making franchise loans significantly easier to obtain than independent business loans. Key requirements updated for 2026: 680 minimum FICO (up from 650), stronger cash flow requirements, and more stringent franchise FDD review. The application process typically takes 45-90 days.
SBA 7(a) loans for franchises: minimum 680 FICO score, 2+ years in business (for existing franchises), 10-20% down payment, personal guarantee from all owners with 20%+ stake. Franchise must be on the SBA approved list.
SBA 7(a) loans cover up to $5M for franchise acquisitions. Guarantee rate is 75-85% (lender bears rest). Interest rates: prime + 2.25-2.75% for loans under $350K, prime + 1.75-2.25% for larger amounts.
Required documents: personal tax returns (3 years), business tax returns, personal financial statement (SBA Form 413), franchise FDD (Item 5 for costs, Item 19 for financial performance), franchise agreement, and business plan with 5-year projections.
SBA loans for franchise acquisitions typically take 45-90 days for full approval. Timeline: application to conditional approval 2-3 weeks; due diligence and appraisal 3-6 weeks; final SBA review 1-2 weeks; closing 1 week.
Most established franchises qualify for SBA 7(a) financing if they have operated for 2+ years with positive cash flow, clean FDD, and no significant legal issues. Exclusions: adult entertainment, gambling, cannabis, and certain financial services.
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