Buying a franchise is one of the fastest ways to become a business owner — but even with a proven business model, one major question remains: How do you fund it?
Franchise ownership can require significant upfront capital. Depending on the brand and industry, total startup costs can range from $50,000 to over $1 million. But the good news is there are more funding options than ever before — including SBA loans, franchise financing programs, and alternative lenders.
In this guide, we’ll walk you through exactly how to get funding for a franchise business in 2025, what lenders are looking for, and how to improve your chances of approval.
Why Franchise Financing Is Different
Unlike traditional startups, franchises come with built-in brand recognition, training, and support — all of which reduce risk for lenders. Because of that, financing a franchise is often easier than financing a brand-new business from scratch.
However, lenders still require proof of financial readiness, business experience, and the ability to repay the loan. They’ll evaluate your credit, business plan, collateral, and liquidity before approving any funding.
Best Funding Options for a Franchise Business
1. SBA 7(a) Loans
SBA 7(a) loans are one of the most popular options for franchise financing because they offer:
Loan amounts up to $5 million
Competitive interest rates
Long repayment terms (up to 25 years)
Low down payments (as little as 10%)
Because SBA loans are government-backed, they’re easier to qualify for and often have more favorable terms than traditional bank loans. Many franchises are already SBA-approved, which can speed up the process.
2. SBA CDC/504 Loans
If you’re financing large fixed assets (like real estate or major equipment), the 504 loan program might be a better fit. It offers:
Up to 90% financing
Fixed interest rates
Terms up to 25 years
Many franchisees combine a 7(a) loan for working capital with a 504 loan for property or buildout costs.
3. Franchise Financing Through the Franchisor
Some franchisors offer direct financing or partnerships with lenders. This can include:
Equipment leasing or financing
Working capital loans
Reduced franchise fees or payment plans
This is often one of the easiest paths since the lender already understands the business model and risks.
4. Bank or Credit Union Loans
Traditional bank loans can also fund franchises, especially if you have strong credit and business experience. However, they typically require:
Higher credit scores (680+)
Larger down payments (15%–30%)
Proven management experience
Because these loans are not government-backed, they can be harder to qualify for than SBA loans.
5. ROBS (Rollover for Business Startups)
A ROBS allows you to use funds from a 401(k) or IRA without paying early withdrawal penalties or taxes. It’s a powerful funding option if you have significant retirement savings and want to invest in yourself.
6. Home Equity or Personal Loans
Some franchisees choose to tap into home equity or use personal loans to cover part of their startup costs. While this can speed up funding, it also increases personal financial risk — so it’s best used as a supplement, not the primary source.
7. Alternative Lenders and Online Financing
If you need faster approval or don’t meet traditional requirements, online lenders can offer working capital, equipment financing, or merchant cash advances. They’re usually faster but come with higher interest rates and shorter terms.
How to Qualify for Franchise Funding (Featured Snippet Section)
Maintain a credit score of 650+
Save 10%–30% of the total investment for a down payment
Prepare a detailed business plan and financial projections
Choose an SBA-approved or lender-friendly franchise brand
Offer collateral or personal guarantees if required
Essential Documents Lenders Will Ask For
Personal and business tax returns (2–3 years)
Personal financial statement
Business plan or franchise disclosure document (FDD)
Franchise agreement
Financial projections and cash flow statements
Bank statements (6–12 months)
Having these ready before you apply can dramatically speed up the approval process.
Tips to Increase Your Approval Odds
1. Choose a Recognized Franchise Brand
Lenders are more comfortable financing established franchises with proven success rates. SBA-approved franchises often get faster approvals and better terms.
2. Strengthen Your Personal Finances
Improve your credit score, reduce personal debt, and increase savings. Lenders want to see financial stability.
3. Show Industry Experience (If Possible)
Even though franchises provide training, having relevant experience shows lenders you can manage the business successfully.
4. Consider Multiple Funding Sources
Combining a loan with personal savings, franchisor financing, or a ROBS strategy can make your application stronger.
5. Work With a Franchise Financing Specialist
Some lenders and brokers specialize in franchise loans. They understand the industry and can connect you with the best funding options quickly.
How Much Do You Need to Invest?
Startup costs vary widely based on the franchise type:
Home-based service franchises: $25,000 – $75,000
Food service franchises: $200,000 – $1,000,000+
Retail or brick-and-mortar: $150,000 – $500,000
Fitness or healthcare franchises: $100,000 – $500,000
Always factor in initial franchise fees, buildout costs, inventory, working capital, and marketing expenses.
Future Trends: Franchise Financing in 2025
AI-driven underwriting: Lenders are increasingly using AI to assess risk faster and offer tailored terms.
Revenue-based financing: A growing number of lenders now offer flexible repayment tied to revenue — ideal for seasonal franchises.
Specialized franchise funding platforms: New online marketplaces connect franchise buyers directly with lenders.
SBA fee waivers: SBA continues to waive or reduce fees on many loans under $1 million, lowering total borrowing costs.
Conclusion: The Right Funding Strategy Unlocks Franchise Success
Starting a franchise is one of the most proven ways to become a business owner — but funding it the right way is key to long-term success.
From SBA loans and franchisor financing to retirement rollovers and online lenders, there’s no shortage of funding options in 2025. The best approach often involves combining several sources, preparing strong financials, and working with lenders familiar with franchise lending.
With the right plan — and the right financing — you’ll be well on your way to launching a profitable franchise business this year.