Buying a Franchise with an SBA Loan
Most franchise acquisitions in the U.S. are financed by SBA loans. The SBA maintains a franchise directory of approved brands, and lenders are generally comfortable financing approved franchises with experienced franchisors.
The SBA Franchise Directory
The SBA Franchise Directory lists franchise brands that have been pre-reviewed by the SBA. If your brand is on the directory, the SBA review of franchise documents is streamlined. If it is not, additional review by the SBA may add time.
Franchisor Cooperation
Lenders require the franchisor to execute an SBA addendum to the franchise agreement covering specific SBA-required provisions. Most major franchisors will execute this routinely. Smaller franchisors may not have processes in place, which can delay closing.
Resale vs New Unit
Buying an existing franchise resale is generally easier to underwrite than opening a new unit — the existing unit has operating history. New unit (greenfield) financing requires a stronger projection package and often a more experienced borrower.
Royalties in the Cash Flow
Lender underwriting captures the ongoing royalty payment (typically 4–8% of gross revenue) as an operating expense. This reduces underwritten cash flow compared to non-franchise businesses with similar gross revenue.
Educational content only — not advice. KQT Advisors, LLC is a commercial loan broker; we are not a lender, attorney, accountant, financial advisor, or fiduciary. We do not originate loans or make lending decisions. The information in this article is provided strictly for general informational and educational purposes and reflects our understanding at the time of writing. It is not — and must not be construed as — financial, tax, legal, accounting, investment, or any other professional advice, and creates no advisor-client relationship. Loan programs, rates, terms, eligibility requirements, fees, and approval criteria are set by individual lenders, the SBA, and other parties and are subject to change at any time without notice. Examples are illustrative only and not guarantees of outcome. Nothing here is a commitment to lend, an offer of credit, or a representation that any specific structure will be available to or appropriate for any borrower. Always consult your own qualified financial, tax, and legal advisors before acting on any information in this article. To the maximum extent permitted by law, KQT Advisors, LLC and its principals, employees, agents, and affiliates disclaim all liability for any direct, indirect, consequential, or incidental loss or damage arising out of any use of, reliance on, or inability to use the information in this article.