Skip to content

7 Best Franchise Financing Options for Your Business

By Randa Kriss
Last updated on April 12, 2024
Edited bySally Lauckner
Fact checked and reviewed
Franchise finance sources include banks, SBA lenders, online lenders, franchisors, as well as personal resources like 401(k) retirement accounts.

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

With franchise startup costs ranging anywhere from $20,000 to $1 million — according to the International Franchise Association, a business loan is often needed to buy a franchise, purchase supplies and equipment, remodel a storefront and more.
Franchise financing is available through a variety of sources including traditional banks, SBA lenders, online lenders, franchisors and even family and friends.
Here are some of the best options for franchise loans, plus information on how to apply for funding.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are 7 franchise loan options

LenderNerdWallet RatingMax loan amountMin. credit scoreNext steps

SBA 7(a) loan

with Fundera by NerdWallet

Best for Franchise SBA loans

$5,000,000650

with Fundera by NerdWallet

Funding Circle - Online term loan

with Fundera by NerdWallet

4.5/5

Best for Online loans for established franchises

$500,000660

with Fundera by NerdWallet

Fundbox - Line of credit

5.0/5

Best for Franchise startup loans

$150,000600
Read Review

OnDeck - Online term loan

with Fundera by NerdWallet

5.0/5

Best for Franchise loans for bad credit

$250,000625

with Fundera by NerdWallet

National Funding - Equipment Financing

with Fundera by NerdWallet

4.5/5

Best for Franchise equipment loans

$150,000600

with Fundera by NerdWallet

Bank of America - Franchise Financing

Best for Franchise bank loans

Undisclosed700
Read Review

SBA CDC/504 loan

Best for Franchise SBA real estate and equipment loans

$5,000,000680
Read Review

Here are 7 franchise loan options

Best for Franchise SBA loans

U.S. Small Business Administration

Max Amount

$5,000,000

Min. Credit Score

650

Best for Online loans for established franchises

Funding Circle

Max Amount

$500,000

Min. Credit Score

660

Best for Franchise startup loans

Fundbox

Max Amount

$150,000

Min. Credit Score

600

Best for Franchise loans for bad credit

OnDeck

Max Amount

$250,000

Min. Credit Score

625

Best for Franchise equipment loans

National Funding

Max Amount

$150,000

Min. Credit Score

600

Best for Franchise bank loans

Bank of America

Max Amount

Undisclosed

Min. Credit Score

700

Best for Franchise SBA real estate and equipment loans

U.S. Small Business Administration

Max Amount

$5,000,000

Min. Credit Score

680

I'M INTERESTED IN:

Our pick for

Franchise SBA loans

SBA 7(a) loans offer competitive interest rates and repayment terms, with loan amounts up to $5 million. Franchisees can use SBA 7(a) loans for a wide variety of purposes.

SBA 7(a) loan

Read Review

with Fundera by NerdWallet

Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
11.50-15.00%
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Lowest interest rate

Max loan

$5,000,000

Min. Credit score

650

Apr range

11.50-15.00%

7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Read Review

with Fundera by NerdWallet

Our pick for

Online loans for established franchises

Funding Circle offers term loans of up to $500,000. To qualify, you’ll need at least two years in business and a minimum credit score of 660. If approved, you can get franchise funding in as little as three days.

Funding Circle - Online term loan

Read Review

with Fundera by NerdWallet

Max Loan Amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
May fund quickly

Max loan

$500,000

Min. Credit score

660

Apr range

15.22-45.00%

Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
Read Review

with Fundera by NerdWallet

Our pick for

Franchise startup loans

Fundbox can provide business lines of credit to franchises that have been operating for at least six months. These lines of credit are available in amounts up to $150,000 and can be used for working capital, making payroll and purchasing inventory or supplies, among other purposes.

Fundbox - Line of credit

Max Loan Amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
May fund quickly

Max loan

$150,000

Min. Credit score

600

Apr range

36.00-99.00%

Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.

Our pick for

Franchise loans for bad credit

You may be able to qualify for franchise financing from OnDeck with a minimum credit score of 625. OnDeck offers short-term loans up to $250,000 that can be well suited for one-time projects, such as marketing campaigns, inventory purchases or business renovations.

OnDeck - Online term loan

Read Review

with Fundera by NerdWallet

Max Loan Amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
May fund quickly

Max loan

$250,000

Min. Credit score

625

Apr range

27.20-99.90%

OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
Read Review

with Fundera by NerdWallet

Our pick for

Franchise equipment loans

If you’ve been in operation for a minimum of six months and have a credit score of at least 600, National Funding offers financing up to $150,000 for new and pre-owned equipment.

National Funding - Equipment Financing

Read Review

with Fundera by NerdWallet

Max Loan Amount
$150,000
Min. credit score
600
Borrowers who can't qualify for more traditional loan options might consider National Funding for fast access to capital.

Max loan

$150,000

Min. Credit score

600

Borrowers who can't qualify for more traditional loan options might consider National Funding for fast access to capital.
Read Review

with Fundera by NerdWallet

Our pick for

Franchise bank loans

You may be able to qualify for franchise financing, including SBA loans, from Bank of America if you’ve been in business for at least two years and generate annual revenues of $250,000 or more.

Bank of America - Franchise Financing

Max Loan Amount
Undisclosed
Min. credit score
700
Bank of America offers franchise financing for established business that can be used to refinance existing business debt, make improvements to a current store or open a new one.

Max loan

Undisclosed

Min. Credit score

700

Bank of America offers franchise financing for established business that can be used to refinance existing business debt, make improvements to a current store or open a new one.

Our pick for

Franchise SBA real estate and equipment loans

SBA 504 loans offer long-term, fixed rate financing. These loans can be used to buy existing buildings, fund new locations or purchase equipment for a franchise or other type of business.

SBA CDC/504 loan

Max Loan Amount
$5,000,000
Min. credit score
680
Est. APR
5.00-7.00%
SBA 504 loans are designed to promote business growth and job creation through the purchase or upgrade of major fixed assets.

Max loan

$5,000,000

Min. Credit score

680

Apr range

5.00-7.00%

SBA 504 loans are designed to promote business growth and job creation through the purchase or upgrade of major fixed assets.

How Much Do You Need?

with Fundera by NerdWallet

What is franchise financing?

Franchise financing is a type of funding, often a small-business loan, that allows a franchisee to pay for expenses associated with buying, opening and running a franchise. You can use this financing to cover startup and day-to-day expenses without depleting your initial investment or personal savings.
Depending on the franchise, the franchisor may offer some type of financing. The UPS Store is one example that offers franchise financing options. If direct financing is not offered, the franchisor likely has established relationships with lending sources. For example, McDonald’s doesn’t provide financing, but it works with many national lenders.
Additionally franchise owners will typically need to meet minimum net worth and/or available capital criteria. Ace Hardware, for example, requires franchise applicants to have at least $250,000 in available cash and a minimum net worth of $400,000.

Franchise financing options

Bank loans

Banks and credit unions can offer a wide variety of loan options for franchise businesses.
Bank of America, for example, offers franchise financing including SBA loans. And Balboa Capital (a division of Ameris Bank) will lend to first-time franchise operators. Some banks even have financing programs for specific franchises, like the McDonald’s financing programs offered by Wells Fargo and U.S. Bank.
Bank business loans will likely have the most competitive interest rates and repayment terms, but require strict criteria to qualify. You’ll typically need excellent credit, strong finances and several years in business to get a franchise loan from a bank or credit union. You may also need to put up collateral to secure your financing.

SBA loans

SBA loans are issued by participating lenders, generally banks and credit unions, and partially guaranteed by the U.S. Small Business Administration. When looking for franchise financing, SBA 7(a) loans and SBA CDC/504 loans are options to consider.
SBA 7(a) loans can be used for a range of purposes, whereas SBA CDC/504 loans must be used for large fixed-asset purchases, such as long-term equipment and existing buildings or land. However, both have long repayment terms and competitive interest rates.
To qualify for an SBA franchise loan, you’ll usually need good credit, multiple years in business and solid finances. Although the SBA no longer regulates which franchises are eligible for funding, SBA lenders may scrutinize the franchise you’re financing.
In order to obtain an SBA loan for franchise financing, lenders must also determine if you meet SBA requirements for all of its loans, which may involve taking a closer look at your personal financials, business size, business plan, collateral and personal and corporate guarantees.

Online loans

If you can’t qualify for a bank or SBA loan — or need faster funding — online loans can be a good alternative to finance your franchise.
Online lenders generally have more flexible requirements than traditional lenders and can often fund applications within a few business days. These lenders may also be willing to work with startup franchises or business owners with credit challenges.
Online lenders can provide different types of funding, including term loans, lines of credit and equipment financing. Some companies, like ApplePie Capital, even specialize in franchise financing.
Compared to banks and SBA loans, however, online loans typically have shorter repayment terms and higher interest rates.

Franchisor financing

Financing of some type may be offered by the franchisor. This may include discounted or waived fees, direct financing or partnerships with third-party lenders to help franchisees get loans.
For example, 7-Eleven has an internal program that will provide up to 65% funding on its franchise fee. The UPS Store works with Guidant Financial to assist franchisees with accessing capital, and offers a discount on the franchise fee for eligible veteran- and minority-owned businesses.
However, not all franchisors provide funding, and available options will vary by company. You can check a franchisor’s website to see if it offers financing for franchisees or reach out to the brand directly for more information.

Personal loans and HELOCs

Certain types of personal loans, including home equity lines of credit (HELOCs), can be used for business purposes, and may be worth talking to a lender or banker about. Although personal loan amounts may be lower than business loan amounts, they also may come with fewer fees and a faster application process.

Rollovers as Business Startups (ROBS)

Some franchisees use a ROBS, which involves withdrawing money from your 401(k) or other retirement account — often with the help of a lawyer or ROBS provider — to invest in your new business. ROBS can be risky and may require substantial fees, so you’ll want to think carefully before choosing this option.

Friends and family loans

If you have a friend or family member who has the means to invest in your business, you might ask for a loan to help get your franchise off the ground. If someone is willing to offer you a loan, you should draft up a loan document that specifies the details and terms of the family and friends loan in order to separate your personal relationship from your business deal.

How to get a franchise loan

To get a loan for your franchise, you can follow these steps:

1. Create a business plan

A business plan provides detailed information on your business goals and how you plan to achieve them is also useful when you’re seeking funding. An executive summary, market analysis, financial projections and a funding request are some important elements that are included in a business plan.

2. Decide which type of financing you need

You’ll want to figure out what type of business loan and how much capital you need, what funds you have available for a down payment and how much debt you can afford. If you’re just starting your franchise, you might look at franchisor financing or online loans.
More established franchises will likely have a wider variety of funding options, including bank or SBA loans.

3. Check your business’s qualifications

Most lenders will use your personal credit score, time in business and annual revenue to evaluate your business loan application. They may also consider your cash flow, financial accounts, available collateral and franchise brand.
You’ll want to review your credit reports and financial statements ahead of time so you know where your business stands. Federal law allows you to get your free credit report from each of the three major credit bureaus annually.

4. Look for ways to strengthen your borrower profile

In addition to having solid credit and financials, there are other things you may want to consider to strengthen your borrower profile. Offering collateral — an asset like property or equipment — can help you during the approval process and may even get you more favorable terms. Also, adding a cosigner to a business loan can help you get financing, if your borrower profile isn’t strong enough on its own.

5. Research and compare lenders

Once you understand your financing needs and your business’s qualifications, you can focus your lender search accordingly. If you have good credit and an established financial history, but need fast financing, for example, you might start researching online lenders like Funding Circle or OnDeck.
You’ll want to research and compare multiple lenders to find the best fit for your business.

6. Submit your application

Your franchise loan application will vary largely depending on the lender and type of financing you choose. Bank and SBA lenders will likely have slower processes with document-heavy applications. You may have to visit a branch location to submit an application in person.
Online lenders, on the other hand, tend to have streamlined applications with minimal documentation.
Generally, however, you’ll need to provide:
  • Basic information about you and your business.
  • Details about your franchise, such as your franchise agreement.
  • A business plan.
  • Personal and business bank statements.
  • Personal and business tax returns.
  • Business financial statements.
  • Collateral information, if required.
If you’re looking to buy commercial real estate or equipment, you’ll also need to provide information and a valuation of the property or machinery you plan on purchasing.
Once you’ve submitted your application, the time to funding will depend on your lender and type of loan. Some online lenders can fund applications within 24 hours, whereas SBA loans can take anywhere from 30 days to a few months to fund.
Last updated on April 12, 2024

Methodology

NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including: transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to business credit bureaus and responsible lending practices. We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.

Wondering if you qualify?

It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.

Learn more

Frequently Asked Questions