Best Franchise Financing Options for Your Business
Best Franchise Financing Options for Your Business
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SBA 7(a) loan
Best for large loan amounts
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
SBA 7(a) loan
Best for large loan amounts
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
Max loan amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
Pros
- Cash can be available within two business days.
- Competitive rates among online lenders.
- Terms up to seven years.
- iBusiness Funding also offers SBA loans up to $5 million.
Cons
- Charges an origination fee.
- Must be in business for a minimum of 24 months.
- Minimum credit score is higher than some other lenders.
iBusiness Funding - Online term loan
Best for long loan terms
Max loan amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
Pros
- Cash can be available within two business days.
- Competitive rates among online lenders.
- Terms up to seven years.
- iBusiness Funding also offers SBA loans up to $5 million.
Cons
- Charges an origination fee.
- Must be in business for a minimum of 24 months.
- Minimum credit score is higher than some other lenders.
Max loan amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
Pros
- Cash can be available within the same business day (does not apply in California or Vermont).
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Cannot fund North Dakota-based businesses.
- Requires frequent (daily or weekly) repayments.
- Interest rates can be high compared with traditional lenders.
- Charges origination fee.
OnDeck - Online term loan
Best for bad credit
Max loan amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
Pros
- Cash can be available within the same business day (does not apply in California or Vermont).
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Cannot fund North Dakota-based businesses.
- Requires frequent (daily or weekly) repayments.
- Interest rates can be high compared with traditional lenders.
- Charges origination fee.
Max loan amount
$150,000
Min. credit score
600
Pros
- Funding in as little as 24 hours.
- Prepayment discounts available.
- Offers loans to startups and borrowers with bad credit.
- No collateral or down payment required.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Requires higher annual revenue than other online lenders.
- Misleading website marketing: National Funding offers only short-term loans and equipment financing/leasing.
- Charges an origination fee.
National Funding - Equipment financing
Best for equipment loans
Max loan amount
$150,000
Min. credit score
600
Pros
- Funding in as little as 24 hours.
- Prepayment discounts available.
- Offers loans to startups and borrowers with bad credit.
- No collateral or down payment required.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Requires higher annual revenue than other online lenders.
- Misleading website marketing: National Funding offers only short-term loans and equipment financing/leasing.
- Charges an origination fee.
Kapitus - Term loan
4.1
Best for fast financing
Max loan amount
$5,000,000
Min. credit score
625
Pros
- Can be approved for financing in as little as four hours.
- Flexible (daily, weekly or monthly) repayment options.
- Can be used to build business credit.
- No prepayment penalty.
Cons
- Collateral may be required.
- High monthly revenue requirements.
- Charges an origination fee.
Kapitus - Term loan
Best for fast financing
4.1
Max loan amount
$5,000,000
Min. credit score
625
Pros
- Can be approved for financing in as little as four hours.
- Flexible (daily, weekly or monthly) repayment options.
- Can be used to build business credit.
- No prepayment penalty.
Cons
- Collateral may be required.
- High monthly revenue requirements.
- Charges an origination fee.
SBA CDC/504 loan
Best for SBA real estate and equipment loans
Max loan amount
$5,000,000
Min. credit score
680
Est. APR
5.00-7.00%
Pros
- Low down payment required.
- Repayment terms of up to 25 years.
- Competitive interest rates.
Cons
- Must meet job creation or public policy goals to qualify.
- Longer processing times than online lenders.
SBA CDC/504 loan
Best for SBA real estate and equipment loans
Max loan amount
$5,000,000
Min. credit score
680
Est. APR
5.00-7.00%
Pros
- Low down payment required.
- Repayment terms of up to 25 years.
- Competitive interest rates.
Cons
- Must meet job creation or public policy goals to qualify.
- Longer processing times than online lenders.
Max loan amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Low minimum credit score, time in business and annual revenue requirements.
- No prepayment penalties, account maintenance fees or inactivity fees.
Cons
- Rates are high compared with traditional banks.
- Weekly repayments required over a short term (maximum of 24 weeks).
Fundbox - Line of credit
Best for new franchises
Max loan amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Low minimum credit score, time in business and annual revenue requirements.
- No prepayment penalties, account maintenance fees or inactivity fees.
Cons
- Rates are high compared with traditional banks.
- Weekly repayments required over a short term (maximum of 24 weeks).
Bank of America - Franchise financing
Best for established franchises
Max loan amount
Undisclosed
Min. credit score
700
Pros
- Bank credit line with competitive interest rates.
- Loans starting as low as $10,000.
- SBA loans also offered.
Cons
- Must be an established business.
- Must have strong annual revenue.
- Limited information on terms and fees available online.
Bank of America - Franchise financing
Best for established franchises
Max loan amount
Undisclosed
Min. credit score
700
Pros
- Bank credit line with competitive interest rates.
- Loans starting as low as $10,000.
- SBA loans also offered.
Cons
- Must be an established business.
- Must have strong annual revenue.
- Limited information on terms and fees available online.
Concerned about tariffs?
Many small-business owners are under increased economic stress and uncertainty following the latest tariff announcements. NerdWallet is here to help you find answers for whatever you're looking for. Here are some resources to help you get started:
- Need emergency funding? Consider a business line of credit.
- Looking for fast access to working capital? Discover the best working capital loans.
- Want tips on how to mitigate the impact of tariffs? Read our guide.
What is franchise financing?
Franchise financing is a small-business loan that a franchisee uses 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.
Some franchisors, like the UPS store, allow you to finance one of its franchises without having to find a third-party loan. Others that don’t offer direct financing, like MacDonald’s, have partnerships with many national lenders to help you fund the purchase of a franchise.
Additionally, franchise owners typically need to meet minimum net worth and/or available capital criteria. Ace Hardware, for example, requires franchise applicants to have at least $350,000 in available cash and a minimum net worth of $700,000.
» MORE: Best startup business loans
Franchise financing options
Bank loans
Banks and credit unions can offer a wide variety of loan options for franchise businesses.
Bank of America 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 likely have the most competitive interest rates and repayment terms, but require strict criteria to qualify. You’ll typically need excellent credit and strong finances to get a franchise loan from a bank or credit union. You may also need to put up collateral to secure your financing.
» MORE: Best banks for business loans
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. Both have long repayment terms and competitive interest rates.
To qualify for an SBA franchise loan, you’ll usually need good credit 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 assists 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 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.
How to get a franchise loan
The steps you will take to fund a franchise will vary based on that franchise’s specific requirements; however, you can generally expect to follow these steps:
1. Determine the right loan type and amount
Before you put in time and effort to create a loan application, you’ll want to figure out what type of business loan is best and how much capital you need. This should include all the costs associated with opening or purchasing a franchise, including required down payments, the initial franchise fee and any ongoing franchise royalty fees. Typical initial franchise fees can range between $20,000 and $50,000, while ongoing royalties can cost you 5% to 9% annually.
» RELATED: Best restaurant equipment financing
2. Check your qualifications
Most lenders will consider the following information when evaluating your business loan application:
- Personal credit score. You can typically qualify for more favorable rates and terms with a higher personal credit score. You can get your free credit report from each of the three major credit bureaus annually.
- Time in business. Experience running a business demonstrates that you are more likely to run a successful business, and therefore are more likely to repay your loan.
- Annual business revenue. Strong existing finances show lenders that the franchise can support loan payments.
- Available collateral. Collateral on a business loan — or assets that lenders can use to cover the loan’s cost in the event of a default — is considered a risk mitigant, and may help you get approved for a franchise loan.
- Franchise brand. Lenders may consider the brand and reputation of your franchise, or the one you’re looking to purchase, when making approval decisions.
In addition to these qualifications, you could consider strengthening your application by adding a cosigner to your franchise loan.
3. Research and compare lenders
Once you understand your financing needs and your business’s qualifications, you’ll want to research and compare multiple lenders to find the best fit for your business. You should compare factors such as business loan rates, repayment terms and speed of funding. Banks and SBA loans typically have low interest rates and long repayment terms, but can take a while to fund. If you’re in need of fast funding, you might consider online lenders.
4. Submit your application
Your franchise loan application will vary largely depending on the lender and type of financing you choose. Bank and SBA lenders likely have slower processes with document-heavy applications and may require you 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.
- 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.
Other ways to fund a franchise
Whether you’re looking to purchase a franchise or expand with a new location, there are other options if you’re struggling to find a franchise loan that works for you.
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.
Last updated on January 2, 2025
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
- 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.
See Your Loan Options
Frequently Asked Questions
Regardless of the brand, you’ll likely need to make a personal investment — as well as acquire funding — in order to finance a franchise. Many franchisors require that franchisees meet net worth and/or startup capital qualifications in order to open a franchise.
If you have limited funds, you’ll need to build up your finances before starting a franchise.
Some of the costs of opening a franchise are similar to any other business: real estate, equipment, inventory, utilities, staff and more. However, franchisees also have to pay specific fees — such as franchise fees, royalty fees and advertising fees — to their parent company.
These fees cover costs for training, operating guidelines and marketing from the franchise headquarters.
Most banks offer financing for the purchase of a franchise, but may be more stringent on their terms and rates compared with other financing options. Banks are a good option if you have good personal credit and personal assets.
Yes, SBA 7(a) loans can be used for a range of purposes, including franchises, and SBA CDC/504 loans can be used for large fixed-asset purchases, such as long-term equipment and existing buildings or land for a franchise. You’ll typically need good credit, solid revenue and multiple years in business to obtain an SBA loan for franchise financing.
Generally, those best qualified for a franchise loan have excellent personal credit and assets, and little personal debt. You also want to make sure the business you are franchising has a good reputation. Experience as a business owner or in the field of the franchise is also a plus.