Question 1

What is an SBA 7(a) loan for a franchise?

Accepted Answer

An SBA 7(a) loan is the most common type of Small Business Administration-guaranteed loan, frequently used to finance franchise purchases. The SBA guarantees a portion of the loan to the lender, which lets banks underwrite franchise loans they otherwise would consider too risky. Loan amounts run from $50,000 up to $5 million, terms up to 25 years for real estate or 10 years for working capital.

Question 2

What is a charge-off rate and why does it matter?

Accepted Answer

A charge-off is a loan the lender has written off as a loss after the borrower stopped paying. Charge-off rate = charge-offs / (charge-offs + paid-in-full). A high rate (above ~10%) signals brands or lenders whose franchisees have struggled to pay back loans. National franchise SBA 7(a) charge-off rates have averaged 5-8% historically, so any brand running materially above that warrants extra diligence.

Question 3

Where does this SBA data come from?

Accepted Answer

We obtain SBA 7(a) and 504 loan-level data through Freedom of Information Act (FOIA) requests to the Small Business Administration. The data includes approval date, amount, lender, borrower business type, NAICS code, geographic location, and outcome (paid-in-full, charged-off, active). We match franchise loans to brand records using normalized name matching.

Question 4

Why might my brand show fewer SBA loans than expected?

Accepted Answer

SBA records only cover SBA-backed loans. Many franchise loans use conventional financing (no SBA guarantee) and don't appear here. Additionally, our match logic requires a fuzzy name match between the SBA borrower name and the FDD brand name, which can be imperfect for brands with multiple DBAs or recent rebrandings. Brands with fewer than 10 SBA loans are flagged with a 'small sample' caveat.

SBA franchise lending by state