How do I get a franchise loan?

Yes — you can get a franchise loan with a 640 FICO score, 24 months as a franchisee, and $100K+ annual revenue for SBA 7(a) loans. Non-SBA term loans accept 600 FICO and 12 months tenure and close in 2–5 days.

See the rate you qualify for in 2 minutes with no credit-score impact.

The specifics

Franchise loans come in two main channels: SBA 7(a) loans backed by the Small Business Administration, and non-SBA term loans or lines of credit from private lenders. Each has different credit, income, and timeline requirements. Understanding the differences helps you choose the right product for your timeline and financial profile.

SBA 7(a) franchise loans

According to the SBA's lending guidelines, SBA 7(a) loans are the most common choice for franchise acquisition financing because of their lower rates and longer repayment terms. Here's what you need:

• Credit score: 640 FICO minimum
• Time in business: 24 months as a franchisee (or in your industry if moving between systems)
• Annual revenue: $100K minimum
• Debt service: Monthly payment kept at 8–12% of gross monthly revenue (lenders use a minimum debt service coverage ratio of 1.25x)
• Loan amount: $50K–$5M+
• Rate: Prime + 2.75–4.75% APR (2026 rates)
• Term: 10–25 years (working capital ≤10 years; equipment/real estate up to 25)
• Funding timeline: 30–90 days (SBA Express under 30)
• Down payment: Typically 10–20% of the loan amount; specific structures vary by lender

SBA 7(a) loans work well for larger purchases—a second unit, buildout costs, equipment, or acquiring a new franchise outright. Because the SBA guarantees a portion of the loan, lenders can offer cheaper rates and longer terms than non-SBA products. According to 2026 small business lending trends, SBA loans have remained the backbone of franchise financing due to predictable approval pathways and franchisor relationships.

Non-SBA franchise term loans

Private lenders offer term loans and lines of credit to franchisees who don't yet qualify for SBA programs or need faster funding. These products move quicker but cost more:

• Credit score: 600 FICO minimum; 650+ for best rates
• Time in business: 12 months as a franchisee (6 months for lines of credit)
• Annual revenue: $100K+ for term loans; $10K+/month for lines of credit
• Down payment: 0–20%, depending on credit and collateral
• Loan amount: $25K–$1M+ (term loans); $10K–$250K (lines of credit)
• Rate: High single digits–low teens APR for strong files (750+ FICO); 18–35% APR for fair-credit applicants (2026)
• Term: 1–5 years (term loans); revolving (lines of credit)
• Funding timeline: 2–5 days (as fast as 48 hours for loans under $250K)

These loans are ideal if you're under 24 months in the system or need cash within days. Specialized franchise lenders often have faster decisioning and franchisor networks already in place, reducing approval time compared to generalist business lenders.

Working capital and fast-close products

If you need cash for payroll, inventory, or emergency repairs before your SBA loan closes, working capital loans and merchant cash advances fill the gap:

• Credit: 550 FICO minimum
• Amount: $10K–$500K
• Rate: Factor rate 1.15–1.40 (≈25–60%+ APR equivalent)
• Funding: 24 hours
• Time in business: 6 months minimum
• Monthly revenue: $10K+ per month

These are expensive but fast, so use them only for short-term gaps or bridge funding while you wait for your primary loan to close. Many franchisees use working capital to cover the first 60–90 days of operations while an SBA 7(a) is underwriting.

Equipment financing

Franchise buildouts—signage, kitchen equipment, point-of-sale systems—are often financed separately via equipment loans. This structure can be faster and cheaper than bundling equipment into a working capital loan:

• Credit score: 580 FICO minimum; zero down at 650+ credit
• Amount: $10K–$5M
• Rate: 8–25% APR (2026)
• Term: Matched to asset life (48–84 months typical)
• Funding: 3–7 business days
• Time in business: 6 months minimum
• Revenue requirement: $100K+ annually

Equipment is secured by itself, so lenders take less risk and can often offer lower rates than unsecured term loans. Many franchisees combine an SBA 7(a) for real estate and working capital with equipment financing for vehicles, kitchen gear, or technology.

Qualification & edge cases

Below 24 months as a franchisee?

If you've been in the system fewer than 24 months, SBA 7(a) loans are off the table. Instead, use a non-SBA term loan (12-month minimum) or a business line of credit (6-month minimum). These will cost more—typically 18–35% APR for fair credit—but they close faster and don't require the franchisor relationship history the SBA wants.

Credit score between 600 and 640?

You can still get a franchise loan, but you're in the non-SBA lane. Non-SBA term loans and lines of credit accept 600 FICO. Your rate will be higher (high single digits–low teens APR if you have strong revenue and time in business; 18–35% if your file is thinner), and you may need 15–20% down. Focus on demonstrating strong cash flow and franchisor support.

Below $100K annual revenue?

SBA 7(a) loans require $100K+ annual revenue. If you're below that threshold, a business line of credit (available at $10K+/month revenue) or a working capital loan can bridge the gap. Once you hit $100K annualized, you can refinance into an SBA 7(a) for better rates.

No collateral?

SBA 7(a) loans and non-SBA term loans are available without collateral, though lenders may put a personal guarantee on the note. If you own a home with equity, a home equity line of credit (HELOC) can offer Prime + 0.5–3% variable rates—significantly cheaper than unsecured products. Equipment financing requires only the equipment as collateral.

Multi-unit franchisee or expansion?

If you're acquiring additional franchise locations, SBA 7(a) loans are your best bet because of loan caps ($5M+) and longer terms. Non-SBA lenders often cap term loans at $1M, and rates climb on multi-unit deals due to increased debt service. Document cash flow from existing units to strengthen your application.

Background & how franchise loans work

When you buy into a franchise, you're purchasing a proven business model, brand, and operational support—but you still need capital to cover the franchise fee, buildout, equipment, and working capital to launch. Unlike a traditional business loan, a franchise loan often involves the franchisor in the underwriting process. Lenders verify that the franchise is legitimate, that you're approved as a franchisee, and that the franchisor will support your unit. This franchisor relationship is a key reason SBA 7(a) rates are so competitive; the SBA sees established franchise systems as lower-risk borrowers.

According to 2026 business loan market research, franchise lending has grown steadily as more entrepreneurs prefer buying established systems over building from scratch. The SBA has invested in streamlining franchise approvals, which is why SBA Express (under 30 days) is now common for franchises under $500K.

The application process typically requires your personal and business tax returns (2 years), recent bank statements (30–60 days), a personal financial statement, the franchise disclosure document (FDD), and a franchise agreement. For SBA loans, lenders also request franchisor approval and may ask for your franchisor's personal guarantee on larger deals.

Once approved, the lender disburses funds directly to the franchisor (franchise fee), landlord (buildout), vendor (equipment), or your business account (working capital). SBA 7(a) loans often close in tranches—some upfront, some upon completion of buildout—to protect the lender's collateral.

Bottom line

To get a franchise loan, you'll need a 640+ FICO score, 24 months in the system, and $100K+ annual revenue for SBA 7(a) loans—which offer the cheapest rates (Prime + 2.75–4.75% APR) and longest terms (10–25 years). If you're newer or have weaker credit, use a non-SBA term loan (600 FICO, 12 months tenure, 2–5 day close) or a business line of credit (6 months tenure, same-day draws). Check the rate you qualify for in 2 minutes with no credit-score impact.

Sources

• SBA Lenders - Small Business Administration
• Small Business Lending Statistics & Trends in 2026 - CreditSuite
• Business Loan Market Trends & Forecast 2026–2035 - Business Research Insights

Disclosures

This content is for educational purposes only and is not financial advice. franchiseeloan.com may receive compensation from partner lenders, which may influence which products are featured. Rates, terms, and availability vary by lender and applicant qualifications.