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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
| Lender | NerdWallet Rating▼ | Max loan amount▼ | Min. credit score▼ | Next steps |
|---|---|---|---|---|
SBA 7(a) loan with Fundera by NerdWallet | Best for SBA franchise loans | $5,000,000 | 650 | with Fundera by NerdWallet |
iBusiness Funding - Online term loan with Fundera by NerdWallet | 4.5/5 Best for established franchises | $500,000 | 660 | with Fundera by NerdWallet |
Fundbox - Line of credit | 4.9/5 Best for new franchises | $150,000 | 600 | Read Review |
OnDeck - Online term loan with Fundera by NerdWallet | 4.7/5 Best for bad credit | $250,000 | 625 | with Fundera by NerdWallet |
National Funding - Equipment Financing with Fundera by NerdWallet | 4.2/5 Best for equipment loans | $150,000 | 600 | with Fundera by NerdWallet |
Bank of America - Franchise Financing | Best for bank loans | Undisclosed | 700 | Read Review |
SBA CDC/504 loan | Best for SBA real estate and equipment loans | $5,000,000 | 680 | Read Review |
Here are 7 franchise loan options
Best for SBA franchise loans
Best for established franchises
Best for new franchises
Best for bad credit
Best for equipment loans
Best for bank loans
Best for SBA real estate and equipment loans
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Our pick for
SBA franchise 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
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.75-14.25%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Personal guarantee is required.
- Collateral is typically required.
- Longer processing times than online lenders.
Low interest rate
SBA 7(a) loan
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.75-14.25%
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.
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Personal guarantee is required.
- Collateral is typically required.
- Longer processing times than online lenders.
Qualifications:
- For-profit U.S. business.
- Unable to access credit on reasonable terms from nongovernment sources.
- Financial qualifications determined by individual lender.
Low interest rate
Our pick for
established franchises
iBusiness Funding 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.
iBusiness Funding - Online term loan
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 two years.
- Minimum credit score is higher than some other lenders.
May fund quickly
iBusiness Funding - Online term loan
Max loan amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
iBusiness Funding 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.
iBusiness Funding acquired Funding Circle in 2024. Its online term loan is an option for established businesses that are financing an expansion or refinancing debt.
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 two years.
- Minimum credit score is higher than some other lenders.
Qualifications:
- Minimum credit score: 660.
- Minimum time in business: Two years.
- Minimum annual revenue: $50,000.
- No bankruptcies in the past seven years.
May fund quickly
Our pick for
new franchises
Fundbox can provide business lines of credit to franchises that have been operating for at least three 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%
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly -- accepts borrowers with a minimum of three months in business.
- 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.
- May require personal guarantee.
- Weekly repayments required over a short term (maximum of 24 weeks).
May fund quickly
Fundbox - Line of credit
Max loan amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox can provide business lines of credit to franchises that have been operating for at least three 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 offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly -- accepts borrowers with a minimum of three months in business.
- 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.
- May require personal guarantee.
- Weekly repayments required over a short term (maximum of 24 weeks).
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 3 months.
- Minimum annual revenue: $30,000.
May fund quickly
Our pick 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
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.
- Requires business lien and personal guarantee.
May fund quickly
OnDeck - Online term loan
Max loan amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
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 offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
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.
- Requires business lien and personal guarantee.
Qualifications:
- Minimum credit score: 625.
- Minimum time in business: One year.
- Minimum annual revenue: $100,000.
- Must have business bank account.
May fund quickly
Our pick for
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
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 - Equipment Financing
Max loan amount
$150,000
Min. credit score
600
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.
Borrowers who can't qualify for more traditional loan options might consider National Funding for fast access to capital.
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.
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: Six months.
- Minimum annual revenue: $250,000.
Our pick for
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
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
Max loan amount
Undisclosed
Min. credit score
700
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 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.
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.
Qualifications:
- Minimum credit score: 700.
- Minimum time in business: Two years.
- Minimum annual revenue: $250,000.
Our pick for
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%
Pros
- Low down payment required.
- Repayment terms of up to 25 years.
- Competitive interest rates.
Cons
- Personal guarantee is required.
- Must meet job creation or public policy goals to qualify.
- Longer processing times than online lenders.
SBA CDC/504 loan
Max loan amount
$5,000,000
Min. credit score
680
Est. APR
5.00-7.00%
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 504 loans are designed to promote business growth and job creation through the purchase or upgrade of major fixed assets.
Pros
- Low down payment required.
- Repayment terms of up to 25 years.
- Competitive interest rates.
Cons
- Personal guarantee is required.
- Must meet job creation or public policy goals to qualify.
- Longer processing times than online lenders.
Qualifications:
- Be a for-profit U.S. business.
- Net worth of less than $15 million.
- Average net income of less than $5 million for the two years prior to your application.
- Financial qualifications determined by individual lender.
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 through a partnership with Guidant Financial. 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 $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 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.
» 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. 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.
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
Whether you are an existing franchise or looking to purchase a franchise, most lenders will use your personal credit score, and if applicable, 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.
This is also a good time to make sure you can afford to take on business debt, and assess what capital you have available for a down payment or assets you may be able to pledge as collateral.
3. Create a business plan
If you don’t have one already, a strong 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.
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 iBusiness Funding (formerly 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.
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 September 11, 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
- 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.