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Are you considering buying a franchise but wondering whether you’ll qualify for financing? SBA loans are one of the most popular ways to fund a franchise startup — but many aspiring entrepreneurs aren’t sure what lenders are actually looking for.
In this post, we’ll break down the key qualifications for SBA franchise financing, what can get your application rejected, and how to improve your chances of approval.
SBA Franchise Loans: A Unique Type of Financing
When it comes to funding a franchise, the SBA 7(a) loan program is one of the best financing tools available. These loans are:
- Backed by the U.S. Small Business Administration
- Available for up to 90% of your total startup costs
- Amortized over 10 years
- Designed to support both franchise startups and resales
But because franchise startups typically lack operating history, lenders are primarily making decisions based on projections and borrower strength.
What Do Lenders Look for in SBA Franchise Loan Applicants?
According to Beau Eckstein, a franchise financing expert with 20+ years of experience, there are five primary criteria lenders evaluate:
1. SBSS Credit Score (0–300)
The SBSS score (Small Business Scoring Service) is a business credit scoring model created by FICO specifically for SBA loans.
- Most lenders require a score of 155 or higher.
- The score considers both personal and business credit history, among other financial data.
2. Personal Credit & Outside Income
Strong personal credit and stable outside income are major pluses—especially if you're keeping your W-2 job while launching the franchise.
- Outside income helps support existing personal debt.
- It reduces lender risk during the franchise’s ramp-up period.
3. Location Proximity
Most lenders prefer borrowers to open a franchise within 2.5 hours of where they live.
- Proximity shows you're committed to being involved in the business.
- Absentee or fully remote ownership is rarely accepted for first-time owners.
4. Solid Financial Projections
Because there’s no historical cash flow for a new franchise, lenders rely on your 3-year projections, especially:
- Year 2 profitability
- Revenue that’s realistic, based on industry benchmarks
Some banks will even stress test your revenue, cutting it by 25% to ensure the business can still survive.
5. Franchise Brand Strength
This one surprises many buyers: You can be denied due to the franchise, not your finances.
- Lenders check the SBA Franchise Directory for approval status.
- They review the Franchise Disclosure Document (FDD), focusing on:
- Number of units
- Number of closures
- Litigation or red flags
- Experience of the franchisor
Emerging or unproven brands may struggle to get financed unless you have exceptionally strong credentials and a large down payment.
Pro Tip: Use an SBA Loan Broker to Match With the Right Lender
Every SBA lender is different. Some require high SBSS scores, others focus more on liquidity or franchise brand history. That’s why working with a franchise loan broker like Beau Eckstein can save you time, frustration, and rejection.
“I usually know within an hour which banks will consider your deal, based on your credit, the FDD, and available capital,” says Beau. “Some banks are just a better fit depending on your background and the franchise you’re buying.”
Ready to Explore Franchise Financing?
If you’re serious about launching a franchise and want personalized advice, you can schedule a free strategy call with Beau Eckstein.
👉 Book your call now at BookWithBeau.com
During the call, you’ll get expert insight on:
- How much you can qualify for
- Which lenders are most likely to approve you
- Whether the franchise you’re considering is fundable
- What next steps you need to take to get approved fast
Final Thoughts
SBA franchise financing can open the door to business ownership, but not everyone qualifies. By understanding what lenders look for—and taking the right steps to prepare—you can dramatically increase your chances of success.
✅ Strong credit
✅ Solid projections
✅ Proven franchise brand
✅ Experienced SBA loan advisor
Get these in place, and you’re well on your way to owning a thriving franchise.
For even more tools, systems, and resources to grow your business faster, grab Beau’s free ebook:
📘 BizScalingPlaybook.com