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Best Franchise Loans

Are you looking for business loans to start or purchase a franchise? These vendors have low borrower qualifications, easy applications, and reasonable fees.

    Chris Motola
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Securing franchise loans to open a franchise business can be a smart choice for an aspiring entrepreneur. Becoming a franchise owner gives you the flexibility of owning a business with the added security of being part of an established brand. However, as with owning any new business, startup costs can be high, and you may require infusions of capital if you encounter hard times.

Franchisees must also pay a franchise fee when opening a new franchise, as well as ongoing royalty fees. You truly need a good business plan, healthy cash flow, and solid franchise financing to succeed.

What follows are some of the best small business loans for a franchise. Remember, the best choice for you will depend on your business’s particular requirements.

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  • Short-term loans, term loans, lines of credit, merchant cash advances, SBA loans, equipment financing
  • FICO: Varies by lender
  • APR: Varies by lender
  • Short-term loans, term loans, lines of credit, merchant cash advances, SBA loans, equipment financing
  • FICO: Varies by lender
  • APR: Varies by lender

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  • Term loans, lines of credit
  • FICO: 625+
  • APR: 29.9%
  • Term loans, lines of credit
  • FICO: 625+
  • APR: 29.9%

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  • Term loans, short-term loans, merchant cash advances, lines of credit, SBA loans, equipment financing, invoice factoring
  • FICO: 500+
  • Interest rates: 11%+ (term loans)
  • Term loans, short-term loans, merchant cash advances, lines of credit, SBA loans, equipment financing, invoice factoring
  • FICO: 500+
  • Interest rates: 11%+ (term loans)

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  • Lines of credit
  • FICO: 600+
  • APR: 4.66%+
  • Lines of credit
  • FICO: 600+
  • APR: 4.66%+

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  • Term loans, lines of credit, merchant cash advances, SBA loans
  • FICO: 660+
  • Interest rate: 4.99%+
  • Term loans, lines of credit, merchant cash advances, SBA loans
  • FICO: 660+
  • Interest rate: 4.99%+

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Table of Contents

The 5 Best Franchise Business Loans

The best franchise business loans combine competitive rates and terms with the versatility to cover the wide variety of expenses a franchise can face. Here are the best franchise business loans from lenders like Lendio, OnDeck, and Funding Circle.

Lendio: Best Loan Marketplace For Franchisees

Lendio


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Pros

  • High borrowing amounts
  • Low credit score requirements
  • Multiple types of financing available

Cons

  • Rates can be expensive
  • Funds can take awhile to disburse
  • Application process can be slow

Why We Chose Lendio For Best Franchise Loan

Lendio is loan aggregator, which means you can apply to every lender within its network with a single application. Lendio provides funding options for businesses that may otherwise struggle to find funding, or that can’t spare the time necessary to hunt down an ideal lender.

Lendio can be a one-stop shop for franchises with terms loans, lines of credit, equipment financing, and SBA 7(a) loans available to qualified applicants.

Lendio Services

Lendio offers nearly any type of funding you need for your business, including:

  • Short-term loans up to $500,000
  • Term loans up to $2 million
  • Lines of credit  up to $500,000
  • Merchant cash advances up to $200,000
  • SBA loans up to $5 million
  • Equipment financing up to $5 million

Lendio Rates & Fees

Lendio’s rates and fees vary based on product type and the lender you select. Lendio has low-interest options such as SBA loans, as well as more expensive funding like MCAs for borrowers with bad credit or other challenges.

Lendio Eligibility Requirements

Lendio works with multiple lenders, and each lender has its own set of eligibility requirements for funding. However, Lendio recommends having a credit score of at least 550 to qualify. Additionally, the more revenue, higher credit score, and longer time in business you have, the better odds you have for qualifying for better rates and terms.

Get Started With Lendio

Read our in-depth review

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OnDeck: Franchise Loans For Borrowers With Fair Credit

OnDeck


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Pros

  • Lower borrower qualifications than banks
  • Lower costs for repeat customers
  • Fast and easy application
  • Funds are disbursed quickly

Cons

  • Financing isn’t available in some states
  • Rates can be expensive

Why We Chose OnDeck For Best Franchise Loan

If you have a newer franchise or need capital ASAP, OnDeck is one of the easiest and quickest ways to get a short-term loan up to $250K or a line of credit up to $100K. Though OnDeck isn’t specifically geared toward franchise owners, it’s a viable online loan option for any small business owner who doesn’t qualify for a bank loan or doesn’t want to wait months to receive loan funds.

OnDeck’s borrower requirements are much more relaxed than those for a bank or SBA loan, and time-to-funding is super speedy. The entire process, from starting your application to receiving your funds, usually only takes a couple of days.

OnDeck Services

OnDeck offers:

  • Term loans up to $250,000
  • Lines of credit up to $100,000

OnDeck Rates & Fees

For OnDeck’s term loans, APRs range from 29.9% to 97.3%, with most borrower’s paying an average of 62.1%. An origination fee of up to 5% may apply.

OnDeck’s lines of credit have APRs that range from 29.9% to 65.9%, with the average borrower paying about 48.9%. There are no origination fees, but a $20 monthly maintenance fee will apply to most borrowers.

OnDeck Eligibility Requirements

To qualify for funding from OnDeck you need to meet these requirements:

  • 1 year in business
  • $100,00 per year in revenue
  • 625+ credit score

Get Started With OnDeck

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Credibly: Franchise Loans For Borrowers With Bad Credit

Credibly


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Pros

  • Low credit score requirements
  • Discounts for repaying early
  • Fast and easy application

Cons

  • Rates can be expensive
  • Some additional fees charged
  • A blanket lien is required

Why We Chose Credibly For Best Franchise Loan

Bad credit is often a major obstacle to getting the franchise financing you need, but it doesn’t need to be an impassable roadblock. Lenders such as Credibly can be a good fallback option for borrowers cut off from other sources due to their credit. Credibly’s loans should be accessible to most franchisees.

Credibly Services

Credibly offers:

  • Short-term loans up to $400,000
  • Merchant cash advances up to $400,000
  • Term loans up to $250,000
  • Lines of credit up to $250,000
  • Equipment financing up to $400,000

Credibly Rates & Fees

Flat rates start at 15% for advances and short-term loans, while medium-term loans have an interest rate between 11% and 36%.

Credibly Eligibility Requirements

To qualify for funding through Credibly, you’ll need:

  • 6 months in business
  • $15,000 per month in revenue
  • 500+ credit score

Get Started With Credibly

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Fundbox: Best Line Of Credit For Franchisees

Fundbox


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Pros

  • Low credit score requirements
  • Funds are disbursed quickly

Cons

  • Rates can be expensive
  • No long-term financing options

Why We Chose Fundbox For Best Franchise Loan

Fundbox’s easy borrower qualifications can make it a great choice for franchisees facing uncertain startup costs. Fundbox’s lines of credit can cover a broad range of expenses, including franchise fees, landscaping, and co-marketing fees. The best part? You’ll only pay interest on the amount of credit that you use.

Fundbox Services

Fundbox offers business lines of credit up to $150,000.

Fundbox Rates & Fees

Fundbox’s rates start at 4.66% for 12-week repayment terms and 8.99% for LOCs with 24-week repayment terms.

Fundbox Eligibility Requirements

To qualify for a Fundbox line of credit you must meet these requirements:

  • 6 months in business
  • $100,000 per year in revenue
  • 600+ credit score

Get Started With Fundbox

Read our in-depth review

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Funding Circle: Loans For Restaurant Franchises (And More)

Funding Circle


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Pros

  • Monthly repayments
  • No prepayment penalty
  • Lower qualifications than banks

Cons

  • Some additional fees
  • Financing isn’t available in some states

Why We Chose Funding Circle For Best Franchise Loan

Funding Circle has numerous franchise partners across the US, including Papa John’s, Pinkberry, Quiznos, and many others. This lender is very flexible, offering various loan products through partnered lenders for franchises in different stages of growth. For qualified applicants, Funding Circle has the advantage of offering faster funding than a bank and having relatively low rates and fees.

Funding Circle Services

Funding Circle offers:

  • Terms loans up to $500,000
  • Lines of credit up to $250,000
  • Merchant cash advances
  • SBA loans

Funding Circle Rates & Fees

Funding Circle’s interest rates start around 4.99% and top out around 27.99%. Term loans have an origination fee of 3.49% to 6.99%. Lines of credit have a draw fee of 1.6%.

Funding Circle Eligibility Requirements

To qualify for funding from Funding Circle, you need to meet these requirements:

  • 2 years in business
  • 660+ credit score

Get Started With Funding Circle

Read our in-depth review

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Methodology: How We Chose Our Top Picks

Merchant Maverick gathers information on a variety of lenders, comparing them across metrics that include interest rates, term lengths, transparency, and customer reviews. Lenders are assigned aggregate scores, which we use when considering the best lenders for a given category.

For best franchise business loans, we also considered overall usefulness to franchisees. Franchisees face many of the same expenses as other small businesses but with the added burden of licensing fees and compliance with franchise policies.

We chose lenders that should be a good fit for franchisees, ones that offer sufficient capital and versatility. Lenders with a history of supporting franchise businesses and/or offering franchise-friendly SBA loans were given extra consideration.

As always, we recommend readers use this list as a starting point for their own research, as the needs of individual businesses can vary greatly.

How Much Can I Borrow For A Franchise?

The amount of money you can borrow for a franchise will vary depending on a number of factors:

  • Your revenue
  • Your creditworthiness
  • Any other debt you’re currently servicing
  • The lender you apply to
  • The franchise you’re looking to buy

There is, however, no hard limit on the amount of money you can theoretically borrow for a franchise.

Can You Use An SBA Loan To Start A Franchise?

SBA loans can be used to start a franchise. In fact, the long repayment terms, high borrowing amounts, and relatively low rates of SBA loans can be ideal for franchise financing. Both SBA 7(a) loans and SBA 504 loans can be used to fund franchises.

You can find SBA-affiliated lenders on our list above or in our list of best SBA lenders.

How To Improve Your Chances Of Being Approved For Franchise Financing

Getting approved for franchise financing can be difficult, particularly if you need startup funds, you need funding but have bad credit, or your franchise has been open for less than a year. However, you can do a few things to improve your chances of being approved for financing, even if it means you may have to take on a personal guarantee.

1) Consider Franchisor Financing

Depending on where you are in the franchise process, you may or may not know that many franchises offer an in-house financing option to pay the franchise fee, equipment, and other startup costs.

As a first-time franchise owner, in-house franchisor financing may be your best bet if your franchisor offers such an option. If you meet the requirements for other loans, compare the lending rates your franchisor provides you and those of outside lenders to ensure you get the best deal you qualify for.

2) Write A Strong Business Plan

Even as a franchisee of an established franchise brand, you still need to have a plan because no two franchises are the same. Having a solid business plan in place shows potential lenders that you know what it takes to run a successful business and will improve the likelihood that your application will be approved.

Having a plan is essential not just for your loan application package but also to inform your decisions as a business owner. Among other pieces of information about your business, the plan should include a detailed overview of the franchise’s financial situation, including how much money you need and what you will do with it. For some online loans, you might only need a one-page business plan; you will likely need a more detailed plan for a bank or SBA loan.

3) Apply To More Than One Lender

Keep in mind that when you’re applying for a business loan, whether it’s for startup costs, working capital, or real estate, it’s a good idea to complete more than one loan application to compare rates and terms. This way, you can be sure that you get the best-priced loan you qualify for.

Applying to multiple lenders also improves the chances that at least one lender will accept you. Most lenders will only do a “soft” pull on your credit in the prequalification stage. They will not do a hard pull (the kind that dings your credit score) unless you accept the loan offer.

You can apply for different business loans individually or use a loan aggregation service Lendio, or BusinessLoans.com.

4) Look Into Alternative Financing

If you don’t qualify for traditional business financing, you can look into alternative financing that you are more likely to be approved for. For example, you might consider:

You may also consider forming a business partnership if you can’t afford to buy a franchise on your own. Or you could borrow the funds you need from a friend or family member. For more ideas, read our post on how to become a franchise owner on a budget.

Which Franchise Business Loan Is Right For You?

Online business lenders represent an important part of the financing industry, as bank loans remain out of reach for many entrepreneurs. Franchise owners benefit from online franchise loans, which have less-strict borrower qualifications than traditional business or SBA loans and put the funds in your account a lot faster.

Generally, online loans have higher rates than bank loans. However, they can be crucial sources of capital to many small business owners, including franchise owners, who would not otherwise qualify for financing. Moreover, some of the best online lenders offer rates that are on par with big banks.

Finally, you must do your research before diving into any franchise brand. Read up on how franchises work, look at franchise opportunities on sites such as the International Franchise Association, and look for SBA-affiliated franchises in the SBA Franchise Directory. Read the franchise disclosure document carefully before signing a franchise agreement, and be sure you’re ready to commit to a relationship with the franchise brand of your choice.

Happy applying, and best of luck buying and growing your franchise!

FAQs: Franchise Loans

Can I get a loan to franchise an existing business?

You can get a loan to franchise an existing business. In fact, many lenders prefer to work with established businesses.

Do banks give loans for franchises?

Many banks offer loans for franchises; just be aware that banks tend to have more stringent qualifications for business lending.

How do you qualify for a franchise loan?

Qualifications for franchise loans vary between lenders. The longer you’ve been in business, the higher your revenue, and the better your credit score, the easier time you’ll have with qualifying.

How can I get a business loan for a franchise startup?

A good first place to look for a business loan for a franchise startup is to find out if your franchisor offers in-house financing. Failing that, look for lenders that service the type of franchise you’re looking to buy.

Which loans are best for franchise startups?

Since buying a franchise can be quite costly, you’ll probably want a long-term loan with reasonably low-interest rates. A good place to start looking is with your franchisor itself, as they may offer in-house financing geared toward your circumstances.

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Chris Motola

Chris Motola

Senior Staff Writer at Merchant Maverick
Chris has been writing about small business topics since 2003. In 2015, he joined Merchant Maverick, where he writes about business financing, payment processing, and demographic trends in entrepreneurship. Chris has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
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