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
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
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
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
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.
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
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.
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
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
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
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
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
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.
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
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
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
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.
What is franchise financing?
Franchise financing options
Bank loans
SBA loans
Online loans
Franchisor financing
How to get a franchise loan
1. Determine the right loan type and amount
2. Check your qualifications
- 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.
3. Research and compare lenders
4. Submit your application
- 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.
Other ways to fund a franchise
Personal loans and HELOCs
Rollovers as Business Startups (ROBS)
Friends and family loans
Methodology
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.