Average Franchise Loan Amount: SBA Start-up Loans vs FDD Item 7 Investment, FY2020 to 2026

Does the typical SBA franchise loan cover the Item 7 investment?

Short answer: it covers most of the midpoint and less of the high end, and the gap is narrowest, not widest, in low-cost concepts. We tested a planned angle: that the typical SBA franchise loan covers well under the Item 7 high end, that buyers therefore bring far more than the 10% minimum, and that the gap is widest where loans are small. The first part holds: across 68 brands the median start-up 7(a) loan equaled 65.0% of the brand’s Item 7 high estimate (FY2020 to FY2026, United States). The second part holds only for buyers whose project costs the Item 7 midpoint or more: the median loan equaled 84.2% of the midpoint but 121.3% of the low estimate. The third part is reversed by the data.

In the lowest band (Item 7 midpoint under $150,000), the median brand loan was 133.0% of the midpoint, and in 4 of 6 brands it exceeded the Item 7 high. In the band of $2 million and over it was 75.3%. Across brands, the higher the Item 7 midpoint, the smaller the share the loan covers (Spearman rho -0.56; 95% bootstrap interval -0.72 to -0.36). Sources: SBA 7(a) FOIA file, Item 7 from Minnesota CARDS FDDs.

Average franchise loan amount vs the Item 7 range, brand by brand

The average franchise loan amount for a start-up SBA 7(a) term loan was $583,364 (mean) and $350,000 (median) across 21,344 franchise-coded loans approved from FY2020 to June 30, 2026 in the United States, according to the SBA FOIA 7(a) file. The mean sits well above the median because a minority of loans are very large, so this study uses medians. For the 164 brands we matched to an FDD, the median start-up term loan was $418,800 (mean $642,670).

Brand by brand, the comparison is with the total in Item 7 of each brand’s 2025 or 2026 FDD, the table the FTC Franchise Rule (16 CFR 436.5(g)) requires. For the 68 brands with at least 10 start-up loans, the median of brand medians was $452,775 against a median Item 7 midpoint of $587,542. The median loan fell inside the Item 7 range for 46 brands, below the low estimate for 15 and above the high estimate for 7. Item 7 costs themselves are covered in our initial investment study; loan volumes over time are in SBA franchise loans.

At the loan level, 57.3% of the 2,773 matched start-up loans fell inside their brand’s Item 7 range, 14.0% were above the high estimate, and 22.5% were at or below 90% of the low estimate. Loans above the high estimate can be legitimate: Item 7 prices one unit, often excludes buying land or a building, and covers only an initial period of working capital, while one loan can fund several territories or property.

The gap grows with the size of the investment

Grouping the 68 brands by Item 7 midpoint shows the opposite of the planned angle. In the under-$150K band (6 brands), the median brand loan was $150,000 against a median midpoint of $113,717, or 133.0% of the midpoint. In the $150K to $350K band it was 96.7%, then 81.9% ($350K to $750K), 73.4% ($750K to $2M) and 75.3% ($2M and over). The estimated dollars a buyer at the Item 7 midpoint would need from outside the SBA loan rise from $0 in the lowest band to $7,610, $76,675, $273,850 and $832,705 (FY2020 to FY2026, United States).

In the lowest band the median brand loan was $150,000, at or above the whole Item 7 total for 4 of 6 brands. That pattern is consistent with buyers financing more than one territory, extra working capital or a vehicle, but the FOIA file does not record what each loan paid for, so this is a reading of the data, not a measured cause.

By sector: the ratio follows investment size

Among sectors with at least three qualifying brands, the median loan ranged from 73.4% of the Item 7 midpoint in health and wellness (9 brands) to 98.9% in senior care (7 brands) and 109.5% in cleaning and restoration (3 brands), FY2020 to FY2026, United States. Sector medians follow investment size: senior care’s median Item 7 midpoint was $155,130, health and wellness’s $604,250.

Lodging had one qualifying brand (13 start-up loans) at 27.6% of its Item 7 midpoint. The same brand also had 61 loans under the 504 program in the period, and SBA treats hotels as special purpose property with a higher 504 contribution, so start-up 7(a) loans alone understate hotel borrowing. Sectors with fewer than three brands are shown in the table but not interpreted.

Over time: loans have caught up with today's Item 7 costs

Measured against each brand’s current Item 7 midpoint, the median start-up loan to matched brands rose from 65.9% in FY2020 to 83.8% in FY2023 and 98.9% in FY2026 through June 30, 2026 (United States). The median loan itself moved from $399,000 in FY2020 to $499,500 in FY2025 and $455,150 in FY2026 to date.

Part of the rise is mechanical: every year is compared with 2025 to 2026 FDD costs, so FY2020 loans funded projects priced before several years of cost growth. Restricting to FY2024 to FY2026 loans, the period closest to the FDD issue dates, 37 brands have at least 10 start-up loans and the median loan equals 95.4% of the Item 7 midpoint and 72.7% of the high. The share of loans at exactly $150,000 fell from 15.4% to 4.6% over the same years.

What buyers bring: the implied cash contribution (estimate)

SBA SOP 50 10 8.1, effective October 1, 2026, keeps the rule that a start-up 7(a) borrower must inject at least 10% of total project costs, counting all costs needed to become operational except lines of credit and 504 loans. The 504 program asks at least 10%, 15% for a new business or special purpose property such as a hotel, and 20% when both apply (13 CFR 120.910).

If a buyer’s project cost equals the brand’s Item 7 midpoint, the median loan leaves an estimated 15.8% ($72,274 at the median brand) to come from outside that loan; at the Item 7 high it leaves 35.0%. For 42 of 68 brands the median loan is below 90% of the midpoint, and for 57 it is below 90% of the high, so a buyer at those cost levels brings more than the 10% minimum. Only 8 brands have a median loan below 90% of the low estimate.

Read the other way, if the 7(a) loan is the only debt, the 10% rule means a financed start-up project costs at least the loan divided by 0.9. For the median brand that is 93.6% of the Item 7 midpoint over FY2020 to FY2026 and 106.0% for FY2024 to FY2026 loans, which suggests the typical financed project sits at or above the middle of the disclosed range. These are estimates: a buyer may hold a second SBA loan, a seller note, franchisor financing or a home equity loan, and the file does not record total project cost. Household cash levels are covered in our franchise affordability study.

Why so many franchise loans are exactly $150,000

14.6% of all franchise-coded start-up 7(a) term loans approved from FY2020 to June 30, 2026 (3,108 loans) were for exactly $150,000, and 22.2% were for $150,000 or less (United States). Under SOP 50 10 8.1 the maximum SBA guaranty is 85% for loans of $150,000 or less and 75% above, so $150,000 is the top of the higher-guaranty tier. The data show the bunching; they do not show why each lender chose the amount. Lender patterns are in SBA lenders for franchises and pricing in franchise loan interest rates.

Where 504 loans fit

The matched brands had 312 loans under the 504 program from FY2020 to FY2026. 67.6% went to businesses more than two years old and 22.1% to start-ups, so most 504 projects buy or build property for an operating business rather than open a new unit. Counting the CDC loan and the third-party bank loan together, the median 504 project debt was $2,234,388. Of the 7 brands with at least 10 504 loans, 4 had median 504 debt above the Item 7 high, which is expected when Item 7 assumes a lease and the 504 project buys the building.

How the FOIA loans were matched to FDD brands

195 of 259 FDD brands (75.3%) matched at least one SBA franchise code with a 7(a) or 504 loan approved FY2020 to June 30, 2026: 149 on an exact normalized name, 45 on a name variant or multi-brand FDD, and 1 as a second FDD of an already matched franchisor. Of the 64 misses, 35 brands appear on a 2026 SBA Franchise Directory file but have no franchise-coded loan, 26 appear on none of five 2026 Directory files and have no coded loan, 2 share a name with an unrelated business, and 1 has loans only under a code shared with a sibling brand. Unmatched brands are small: their median franchised outlet count in FDD Item 20 is 6.5, against 85 for matched brands. Match rates ran from 50.0% (business services) to 94.4% (children’s education and retail).

A hand check of 20 randomly drawn matched brands compared the FOIA franchise name and the Directory name for each code with the FDD brand and the loans’ industry codes: 19 were correct, none wrong and 1 uncertain (a sibling hotel label within the same franchisor). The match error rate is 0.0% (5.0% counting the uncertain case), with a 95% upper bound of 16.8% (24.9%). Lenders must code a loan for it to count, and coding fell while SBA stopped publishing the Directory (88 FR 21074), so loans to matched brands are an undercount; see the SBA Franchise Directory tracker.