Glossary · Doing the deal
Initial franchise fee
In short
The upfront payment made to a franchisor to acquire the rights to operate a franchise business. This fee is a component of your total project costs and is an eligible use of 7(a) loan funds.
What it means in a deal
When buying a franchise, this fee is a significant part of your capital outlay. The SBA allows 7(a) loan proceeds to cover this cost, along with working capital, equipment, and other eligible expenses. Ensure you budget for it accurately as part of your total project costs.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Initial franchise fee
- Does an SBA 7(a) loan cover the initial franchise fee and associated startup costs?
- What is the purpose of the initial upfront fee charged on an SBA 7(a) loan?
- Can I use an SBA 7(a) loan to finance a franchise fee for an existing franchise location?
- Is an additional guaranty fee required if a 7(a) loan amount is increased after the initial authorization?
- Can an SBA 7(a) loan finance the cost of a franchise fee for a new or existing franchise?
- Can I use an SBA loan to acquire a non-SBA approved franchise if I pay the franchise fee myself?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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