SBA Franchise Loans: How Much 7(a) and 504 Lending Goes to Franchises, FY1991 to FY2026

Data and methods

This study uses every loan row in the SBA 7(a) and 504 FOIA files, as of June 30, 2026: 1,961,455 SBA 7(a) approvals and 229,049 SBA 504 approvals from FY1991 to June 30, 2026. SBA fiscal years run from October 1 to September 30. FY2026 is partial and starts on November 13, 2025, because the files contain no 7(a) or 504 approvals dated October 1 to November 12, 2025, when SBA said the shutdown halted approvals.

Franchise-coded loan. A loan with a value in the FranchiseCode field, which identifies the brand. Through FY2017 the file uses five-digit numeric codes; from FY2018 it uses SBA franchise identifier codes that start with S, the codes listed in the SBA Franchise Directory. In the current SBA Franchise Directory file, 730 coded brands carry a code start date of October 1, 2017, the first day of FY2018. In 2013 the Government Accountability Office reported that SBA planned to replace its franchise codes and found discrepancies in SBA’s franchise loan data.

Directory periods. SBA stopped publishing the Franchise Directory when a final rule (88 FR 21074) took effect on May 11, 2023, and brought it back with SOP 50 10 8 on June 1, 2025. Monthly comparisons use three windows: published (January 2022 to April 2023), not published (June 2023 to April 2025) and reinstated (June 2025 to June 2026). May 2023 and May 2025 are left out as transition months.

Artifact test. For each month, the expected franchise share applies the share of loans that were franchise-coded in each 6-digit NAICS industry during a baseline window to that month’s loans (3-digit NAICS when the baseline has fewer than 20 loans). Two baselines bracket the estimate: January 2022 to April 2023, and August 2025 to June 2026. If franchise lending had truly fallen, coded and expected shares would fall together; if only coding fell, the coded share drops below the expected share.

Other measures. Dollars are gross approved amounts. Loan sizes are converted to first-half 2026 dollars with the BLS CPI-U series CUUR0000SA0 (fiscal-year averages rebased to the January to June 2026 average of 330.724; BLS did not publish October 2025). Interest-rate spreads subtract the bank prime loan rate (FRED DPRIME) on each approval date. Sectors use the lender-entered NAICS code with Census NAICS 2022 titles. Brands are SBA franchise codes; concentration uses the Herfindahl-Hirschman index (sum of squared percentage shares). Counts include loans later cancelled; excluding them moves the FY2024, FY2025 and FY2026 coded shares to 8.8%, 10.2% and 14.7%. The scripts and outputs are in the downloads. No borrower-level row is published.

Results: SBA franchise loans as a share of 7(a) lending, FY1991 to FY2026

The franchise-coded share of 7(a) loans has risen over three decades, with two breaks that line up with changes in how loans are coded rather than with changes in lending.

Franchise-coded loans were 6.0% of U.S. 7(a) loans in FY1991 and 3.8% in FY2006, the low point. The share was 9.6% in FY2017 and 11.7% in FY2018, the first year of SBA’s S-codes. It peaked at 15.6% in FY2021 and was 13.8% in FY2022. It then fell to 8.4% in FY2024 and 9.2% in FY2025 before returning to 13.8% in FY2026 through June 30, 2026 (SBA 7(a) and 504 FOIA files, as of June 30, 2026).

The dollar share runs higher than the loan share in every recent year: 21.3% in FY2022, 12.4% in FY2024 and 21.8% in FY2026. From FY1991 to June 30, 2026, franchise-coded 7(a) approvals totaled 155,337 loans and $84.3 billion (Appendix Table A1).

Results: did franchise lending fall when the SBA Franchise Directory was removed?

No. The monthly data show franchise coding falling while the volume of loans in franchise-heavy industries kept rising, and the coded share returning once the Directory came back.

With the Directory published (January 2022 to April 2023), franchise-coded loans were 13.8% of U.S. 7(a) loans and 20.9% of dollars. While it was not published (June 2023 to April 2025), the coded share fell to 8.4% of loans and 12.3% of dollars, reaching a monthly low of 6.1% in February 2025. After reinstatement (June 2025 to June 2026) it was 13.6% of loans and 21.4% of dollars, with a monthly high of 17.9% in January 2026 (SBA 7(a) and 504 FOIA files, as of June 30, 2026).

The industry mix of 7(a) loans did not shift away from franchising. Holding each industry’s coding rate at its January 2022 to April 2023 level, the expected franchise share for June 2023 to April 2025 is 13.7%; using the reinstated period’s rates, it is 12.7%. The gap between those figures and the 8.4% coded share is the coding artifact.

Two checks point the same way. In limited-service restaurants (NAICS 722513), loans averaged 148.6 a month in the published period and 200.7 a month in the gap period, yet the franchise-coded share of those loans fell from 52.5% to 35.1%, then recovered to 49.1%. Among loans of $1 million or more, the coded share went from 19.9% to 11.4% and back to 20.7%.

Results: how big are SBA franchise loans compared with other 7(a) loans?

Franchise-coded 7(a) loans are more than twice the size of other 7(a) loans at the median, and the gap has widened in real terms since 2000.

In FY2026 through June 30, 2026, the median franchise-coded 7(a) loan was $394,000 and the median other 7(a) loan was $166,500, a ratio of 2.4. Means were $845,790 and $485,435 (SBA 7(a) and 504 FOIA files, as of June 30, 2026). In first-half 2026 dollars, the franchise median rose from $290,519 in FY2000 to $395,986 in FY2026 (+36.3%), while the other median fell from $232,416 to $167,339 (-28.0%), using BLS CPI-U. The non-franchise median bottomed at $72,478 in FY2007, a year of many small loans. Both medians peaked in FY2021 ($540,589 and $372,136 in first-half 2026 dollars).

Results: interest rates, terms and guaranties on SBA franchise loans in FY2026

Franchise-coded loans in FY2026 carried slightly lower rates, used SBA Express less, and were more often over $1 million than other 7(a) loans (Appendix Table A4).

For FY2026 approvals (November 13, 2025 to June 30, 2026), the median initial interest rate was 9.25% on franchise-coded loans and 9.50% on other 7(a) loans. The median spread over the prime rate on the approval date was 2.50 percentage points for franchise-coded loans and 2.75 for others. Variable rates applied to 91.7% of franchise-coded loans and 86.7% of others. Both groups had a median term of 120 months; 13.2% of franchise-coded loans ran 240 months or more, against 11.2% (SBA 7(a) and 504 FOIA files, as of June 30, 2026).

Only 16.8% of franchise-coded loans went through SBA Express, against 37.0% of other loans. 22.1% of franchise-coded loans were $1 million or more (13.5% for others), and 2.7% were at the $5 million program maximum (0.6%). The SBA guaranty covered 74.0% of franchise-coded dollars and 73.2% of other dollars.

SBA caps variable 7(a) rates at the base rate plus 3.0 percentage points for loans above $350,000 and plus 6.5 for loans of $50,000 or less (SBA). With prime at 7.00% since September 17, 2026 (FRED), the cap on a prime-based loan above $350,000 is 10.00%.

Results: startups, resales and existing businesses

SBA franchise loans are mostly startup loans; other 7(a) loans mostly go to existing businesses.

From FY2020 to June 30, 2026, lenders classified 54.0% of franchise-coded 7(a) loans as startups (loan funds open the business), 13.3% as new businesses of 2 years or less, 14.9% as changes of ownership and 17.0% as existing businesses. For other 7(a) loans the split was 11.0%, 16.9%, 9.8% and 61.1% (SBA 7(a) and 504 FOIA files, as of June 30, 2026). The startup share of franchise-coded loans was 45.4% in FY2020, 62.1% in FY2024 and 54.8% in FY2026; the change-of-ownership share was 19.8% in FY2020 and 15.0% in FY2026. A separate report will cover franchise resales in depth.

Results: which sectors and brands get SBA franchise loans?

Restaurants lead by count, hotels lead by dollars, and no single brand takes more than about 2% of franchise loans.

From FY2024 to June 30, 2026, there were 18,722 franchise-coded 7(a) loans. Food services and drinking places (NAICS 722) took 23.5% of them (4,397 loans), amusement and recreation (713) 10.9%, and personal and laundry services (812) 8.2%; the top three sectors took 42.6%. Accommodation took 6.1% of franchise-coded loans but 26.0% of franchise-coded dollars. In FY2026, 60.6% of accommodation 7(a) loans were franchise-coded (SBA 7(a) and 504 FOIA files, as of June 30, 2026, Census NAICS titles).

Those loans were spread across 2,361 franchise codes. The largest, The UPS Store, had 426 loans (2.28%); the top 20 codes took 13.9% of franchise-coded loans; 784 codes had exactly one loan and 57 had 50 or more. The Herfindahl-Hirschman index was 23.6 for loan counts and 42.5 for dollars on a 0 to 10,000 scale, close to the floor of that scale. Appendix Table A6 lists the top 20 codes as neutral counts; it says nothing about how loans to any brand performed.

Results: SBA 504 franchise loans

The 504 program shows the same coding dip, a lower franchise share than 7(a), and a heavy tilt to hotels.

Franchise-coded loans were 10.8% of U.S. SBA 504 loans in FY2022, 6.9% in FY2024, 8.0% in FY2025 and 9.7% in FY2026 through June 30, 2026; the FY2026 dollar share was 16.5% (SBA 7(a) and 504 FOIA files, as of June 30, 2026). From FY2024 to June 2026, 1,390 of 17,214 504 loans were franchise-coded (8.1% of loans, 14.1% of dollars). Accommodation took 36.1% of franchise-coded 504 loans, food services 17.5%, social assistance (mainly child care) 9.8% and gas stations 9.1%. Of 930 hotel and motel 504 loans, 502 (54.0%) were franchise-coded, rising to 64.8% in FY2026. In child care (NAICS 624410), 124 of 570 loans (21.8%) were franchise-coded; in limited-service restaurants, 144 of 431 (33.4%).

The median FY2026 franchise-coded 504 loan was $1,655,500 for the SBA/CDC portion, with a median third-party lender portion of $2,300,000. The 504 maximum is $5.5 million (SBA).

Discussion: what the SBA franchise loans data can and cannot show

The central finding is about measurement. The FOIA file’s franchise flag tracks the Directory: when SBA stopped publishing it, lenders coded fewer franchise loans, and when SBA restored it, coding returned to its earlier level within a few months. Industry mix, restaurant loan volume and the coded share of large loans all point to stable franchise lending through FY2024 and FY2025. Counts of SBA franchise loans built from the file for those years understate the true number.

With that correction, a simple ratio holds for the periods with a published Directory: franchise-coded borrowers took about 1 in 7 SBA 7(a) loans (13.8% and 13.6%) and about 1 in 5 dollars (20.9% and 21.4%). The larger dollar share follows from loan size: the FY2026 franchise median was 2.4 times the non-franchise median, and franchise loans skew toward startups and large-ticket sectors such as hotels (6.1% of franchise-coded loans, 26.0% of franchise-coded dollars).

The rule that removed the Directory said the fact that an applicant is a franchisee is not in itself a reason to make it ineligible (88 FR 21074). SBA describes the current Directory as listing the franchise brands eligible for SBA financial assistance (SBA), and the September 29, 2026 file lists 2,401 coded brands, 807 of them coded since June 1, 2025. Readers comparing brands should use the steps in buying a franchise and the FDD rather than loan counts, which measure financing activity, not outcomes. State-level franchise counts are in franchise statistics by state, and closure data are in the franchise failure rate study.

Limitations

• The franchise flag is a lender-entered code. Loans to franchisees without a code count as non-franchise, so all shares are lower bounds, and FY2024 to FY2025 are most affected.
• The 2018 switch from numeric codes to SBA identifier codes means pre-FY2018 and later shares are not strictly comparable.
• Counts are approvals, including loans later cancelled; they are not disbursements. The FY2025 total of 84,840 7(a) and 504 rows is 440 more than the 84,400 loans SBA reported (SBA).
• FY2026 is partial (November 13, 2025 to June 30, 2026) and excludes the shutdown weeks.
• Business age and NAICS codes are lender-reported and not audited by SBA.
• The expected-share model assumes franchise shares within each industry were stable; it estimates, not observes, uncoded franchise loans.
• Brand counts use SBA codes; a brand with more than one code is split. This report publishes no brand-level default or charge-off data, and loan status is withheld by SBA for active loans.
• In the 504 file, the approved amount is the SBA/CDC portion only.
• CPI-U adjusts for consumer prices; business build-out costs may have moved differently.

Appendix: data tables

Tables A1 to A6 reproduce the series behind the figures. Each is downloadable as CSV under CC BY 4.0 with attribution to Franchise Consultants and Brokers, franchiseconsultantsandbrokers.com.