Franchise Loans: Top Financing Options for May 2024

Compare top lenders to find franchise loans for your business

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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
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Best franchise loans in May 2024

By Timothy Moore | Edited by Abigail Bassett and Janet Schaaf | April 29, 2024
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
LenderUser ratingsBest for…Max. loan amountMin. interest rateMinimum RevenueTime in businessFIELD8
User ratings coming soonFranchise SBA Loans$5,000,000Base + 3.00%Not disclosedNot stated, but two years are typically needed for approvalGet business loan offers
User ratings coming soonNew Franchises$250,0003.00% monthly fee$3,000 monthly1 yearGet business loan offers
User ratings coming soonEstablished Franchises$500,00011.29%Not disclosed2 yearsGet business loan offers
User ratings coming soonEquipment$5,500,0003.00% of amount financedNot disclosedNot disclosedGet business loan offers
(692)
User Ratings & Reviews rating-reviews-tooltip-icon

Ratings and reviews are from real consumers who have used the lending partner’s services.

Fast funding$250,00027.30%$100,000 annually1 yearGet business loan offers
Fundbox logo
(30)
User Ratings & Reviews rating-reviews-tooltip-icon

Ratings and reviews are from real consumers who have used the lending partner’s services.

Line of Credit$150,0004.66% for 3 weeks; 8.99% for 3 weeks$100,000 annually“Ideally” 6 monthsGet business loan offers
Learn more about how we chose our picks.

Franchise loan lenders at a glance

SBA 7(a) loans: Best franchise SBA loans

12
Loan amountsUp to $5,000,000
Starting interest rateBase rate plus 3.00%
Term length (months)300 maximum for real estate, including extensions
Minimum credit scoreNo stated minimum, but higher chance of approval with 680+
Minimum time in businessNo stated minimum, but two years are typically needed for approval

American Express Business Line of Credit loans: Best for new franchises

12
Loan amounts$2,000 to $250,000
Starting interest rate3.00%
Term length (months)6, 12 or 24 months
Minimum credit score660
Minimum time in business1 year

Funding Circle loans: Best for established franchises

12
Loan amounts$25,000 to $500,000
Starting interest rate11.29%
Term length (months)6 to 84 months
Minimum credit score660
Minimum time in business2 years

SBA CDC/504: Best for equipment

12
Loan amounts$125,000 to $5,500,000
Starting interest rate3.00% of the amount financed
Term length (months)120 to 300 months
Minimum credit scoreNo stated minimum
Minimum time in businessNo stated minimum

OnDeck loans: Best for fast funding

12
Loan amounts$5,000 to $250,000
Starting interest rate27.30%
Term length (months)Up to 24 months
Minimum credit score625
Minimum time in business1 year in business

Fundbox loans: Best line of credit

12
Loan amountsUp to $150,000
Starting interest rate4.66% for 12 weeks; 8.99% for 24 weeks
Term length (months)3 or 6 months (12 or 24 weeks)
Minimum credit score600
Minimum time in business“Ideally” 6 months

How much franchise financing do I need?

The cost to start a franchise can vary considerably, from $20,000 or less to more than $1 million. To cover various costs related to opening a franchise, such as purchasing equipment, furniture, fixtures, supplies, or a building, you may consider an SBA 7(a) loan, which has a maximum loan amount of $5 million.

The wide variation in necessary startup funds depends entirely on the industry and needs of the particular franchise — and the company’s own requirements. This means you could need just a little or a lot of help via franchise financing.

But you can’t borrow it all. Most franchisors require you to have serious cash on hand already. For instance, Pet Supplies Plus requires franchise applicants to have $600,000 in total net worth, including $200,000 in liquid assets. McDonald’s is equally strict, requiring $500K of non-borrowed personal resources to be considered for a franchise.

Franchise financing options

Franchisor financing

In many cases, the brands themselves — popular restaurants, stores, gas stations, plumbing and cleaning services and other businesses — may offer their own financing to franchise applicants. Even if the parent companies themselves don’t offer direct financing to franchisees, they often partner with specific lenders to grant loans to applicants.

If you have a specific franchise in mind, start by researching the company’s website to understand what loan options are available. But always read the fine print; you may be able to find better franchise financing elsewhere.

SBA

The U.S. Small Business Administration (SBA) works with approved lenders that issue loans to small business owners, backed in part by the federal government. Such lenders include traditional banks and credit unions but also include community development organizations and microlending institutions.

These loans can and do apply to franchise hopefuls. You’ll generally need good credit, a solid business plan and multiple years in business to qualify. SBA loans have a high max loan amount ($5 million) and repayment term (25 years), though these won’t apply to every loan.

Banks

Large banks and credit unions often offer small business loans that extend to franchisees. Depending on your credit score and liquid funds, you may qualify for such a loan with your preferred bank or credit union.

These loans often have low interest rates and agreeable repayment terms, but business loan requirements are generally strict. You’ll need an excellent credit score and to be on solid financial footing to qualify. Be prepared to present a comprehensive business plan and put up collateral, as well.

Online lenders

Online lenders can typically fund loans faster than traditional banks — and much faster than loans via the SBA. You might also be able to get a franchise loan from an online lenderwith less liquid funds and a lower credit score, though each lender will have its own unique criteria.

In turn, however, expect higher business loan interest rates and short repayment terms when going through an online lender.

How to get a franchise loan

Getting a franchise loan can be a complex and daunting process. To help, we’ve broken it down into five digestible steps. Refer to our comprehensive guide on how to get a business loan for more in-depth information.

1. Research the franchise

If you know which franchise you’d like to start, research the company to understand the franchise fee and general startup costs that are required. Network with other franchisees who’ve successfully opened a franchise under that parent company to learn how they secured funding.

At this point, you can also determine if the franchise:

  1. Offers its own direct financing (or partners with specific lenders to offer financing)
  2. Is already registered with the SBA, which could increase your chances of qualifying for an SBA loan

Pro Tip: If you are open to many franchise options, specifically research franchises with lower franchise fees and startup costs. This can improve your chances of getting funding.

2. Review your finances

Once you know which franchise you’d like to open, review your own finances to see if you’re currently in a strong enough financial position to do so. You may want to work with an accountant to get a handle on your net worth, liquid funds and credit score.

3. Research financing options

Start with the franchise itself to see what financing it offers and if you qualify. We always recommend researching SBA loans as well as franchise financing through banks, credit unions and online lenders so you have a clear picture of the rates and terms you can qualify for.

4. Assemble a business plan

Assuming you meet the general requirements for approval, build a business plan that demonstrates how you’ll turn a profit and why you’re the right person for the job. Check to see if your preferred lender has specific guidelines for crafting a business plan.

You’ll need a lot of business know-how to launch a franchise, so this is good practice. But if this part of the process is overwhelming, consult with a marketing professional or business consultant who can help you build your case.

5. Apply with a lender

The lender you choose will have a thorough process for you to follow when applying, either online or in person. This step involves a lot of paperwork, including:

  • The business plan you’ve already built
  • Recent tax returns (for you and your business, if applicable)
  • Recent bank statements (for you and your business, if applicable)
  • Franchise agreement

What to look for in a franchise loan

When looking for a franchise loan, prioritize options with the lowest rates and fees, but also be realistic about what you can qualify for. Loans with the best interest rates and lowest fees are the hardest to get, so carefully consider a lender’s requirements for time in business, credit score, net worth and access to liquid funds. Also factor in the approval and funding timeline, especially if you want to move fast.

Time in business requirement: Some lenders expect you to have a minimum number of years in business; prioritize applying only to those for which you meet this requirement.

Rates and fees: Like with any loan, expect to pay upfront fees and ongoing interest rates. The best franchise loans will have low fees and interest rates, but are only available to the most qualified borrowers.

Credit and financial requirements: Many lenders have minimum credit score requirements and often expect applicants to have a minimum net worth and/or amount of liquid funds. Ensure you can meet these requirements before applying.

Approval timeline: Online lenders often offer the fastest approval and funding process, but you may get better rates and a higher loan amount if you go with the SBA or a traditional lender — just expect the process to take longer.

  Not sure how much you can borrow? Use our business loan calculator to estimate how much you might qualify for.

How we chose the best franchise loans

We reviewed top lenders to determine the overall best franchise loans. To make our list, lenders must meet the following criteria:

  • Flexible time in business requirements: We chose lenders with a range of time in business requirements to assist business owners at different stages.
  • Rates and terms: We prioritize lenders with more competitive fixed rates, fewer fees and greater options for repayment terms, loan amounts and APR discounts.
  • Repayment experience: For starters, we consider each lender’s reputation and business practices. We also favor lenders that report to all major credit bureaus, offer reliable customer service and provide any unique perks to customers, like free wealth coaching.

Frequently asked questions

Starting a franchise with no money is challenging, but it’s not impossible. Research franchises with small fees — like those less than $20,000. Check to see what loan options you can get directly from the franchise company, but also consider loans from the SBA or online lenders, the latter of which may have less strict credit requirements than traditional banks and credit unions.

Banks and credit unions do give loans to franchisees. Research the financial institution of your choice to understand their business loan requirements before you apply.

To get a franchise loan, you need to be a successful entrepreneur with a strong credit score, healthy finances that include liquid assets, a detailed business plan and a positive net worth. Each lender has its own requirements for getting a loan, but they’re more likely to take you seriously — and approve you — if you have a fair amount of capital to invest in the franchise and a proven track record of turning profits.