How to Finance a Franchise Using an SBA Loan

So you’re thinking about buying a franchise—but figuring out how to pay for it feels like the biggest hurdle. You’re not alone. Many aspiring franchise owners have the passion, the work ethic, and the vision… but not a pile of cash sitting around waiting to be deployed.

That’s where the U.S. Small Business Administration comes in. If you’re exploring franchise ownership and want a smart, accessible way to fund your business, an SBA loan can be a powerful tool. Let’s break down what it is, how it works, and why it’s often the go-to option for first-time franchise buyers.

What Is an SBA Loan?

An SBA loan is a small-business loan backed by the U.S. Small Business Administration. The SBA does not lend the money directly, instead, it guarantees a portion of the loan issued by an approved bank or lender. That guarantee reduces risk for the lender, which often means better terms for you.

For franchise buyers, SBA loans are especially attractive because they can be used to cover many of the big startup costs, including:

• Franchise fees
• Equipment and vehicles
• Build-out or commissary costs
• Initial working capital

In short: SBA loans make franchise ownership more attainable without requiring you to self-fund everything upfront.

 SBA Financing Is a Popular Path to Franchise Ownership

Buying a franchise already lowers some of the risk of starting a business from scratch. Pair that with SBA financing, and you’ve got a strong foundation.

Here’s why many franchisees go this route:

1. Lower Down Payments

Compared to traditional business loans, SBA loans typically require less money down—often around 10–20%. That means you can preserve cash for operations, marketing, and growth.

2. Longer Repayment Terms

SBA loans often offer extended repayment timelines (up to 10 years for most franchise-related expenses). Lower monthly payments = more breathing room as your business ramps up.

3. Competitive Interest Rates

Because the loan is partially guaranteed, interest rates are usually more favorable than other small-business financing options.

4. Built for Owner-Operators

SBA lenders love franchise models—especially those with strong systems, support, and unit economics—because they’re designed for hands-on owners who want to build something sustainable.

What Lenders Look for in SBA-Backed Franchise Loans

While SBA financing is accessible, it’s not automatic. Lenders want to see that you—and the franchise—are set up for success.

Common factors include:

• Solid personal credit
• Some relevant work or management experience
• A clear business plan and financial projections
• A franchise brand with documented systems and support

This is where choosing the right franchise matters. The first thing you will want to look for is whether the franchisor is listed in the SBA Franchise Directory, an official list maintained by the Small Business Administration that confirms a brand has been reviewed for  loan eligibility.  Before a franchise is added to the directory, the SBA reviews the franchisor’s legal structure, franchise agreement, and operating model to ensure it meets lending standards and supports independent small business ownership. Being listed helps lenders quickly verify that the franchise meets SBA financing criteria, which can make the underwriting process faster and more straightforward.

SBA Financing + Franchising: A Smart Combination

When done right, SBA financing allows you to step into business ownership with confidence—leveraging a proven franchise model while keeping your personal risk manageable. For many franchise buyers, selecting the right SBA loan is critical for success. The SBA 7(a) loan is the most common financing tool used, thanks to its flexibility and ability to cover key startup costs like the franchise fee, equipment, vehicles, and initial working capital. The SBA 504 loan, while less commonly used for full franchise startups, can be a strong option when a significant portion of the investment is tied to major equipment or real estate, offering long-term, fixed-rate financing for those assets.

This path isn’t about getting rich quick. It’s about building something meaningful, sustainable, and aligned with your lifestyle—supported by longer repayment terms and lower upfront cash requirements than many traditional loans.

At Rainbow Snow, SBA financing is typically evaluated by folks who want to be actively involved in their business, embedded in their community, and proud of what they’re building—one event, one neighborhood, one smile at a time.

Want to Learn More?

If you’re curious whether SBA financing could work for you—and what buying a  Rainbow Snow franchise really looks like? Let’s talk about how you can own a mobile shaved ice business and start earning on your terms!