Franchises are popular for a reason: you get a proven model, brand recognition, and a playbook instead of building from scratch. But they also carry real upfront costs, and most franchisees finance them rather than paying cash. Here’s how franchise financing works.
What franchise financing covers
Opening a franchise has a fairly predictable cost stack:
- The franchise fee paid to the franchisor.
- The build-out and equipment for your location.
- Initial inventory and supplies.
- Working capital to carry you through the launch period before the business stands on its own.
A single financing package — often an SBA loan — can bundle most of these.
The main financing options
SBA 7(a) loans
The SBA 7(a) program is the most common way to fund a franchise. It can cover the franchise fee, build-out, and working capital, with the SBA guarantee enabling longer terms and competitive pricing. One thing makes franchise SBA loans distinctive: the franchise brand’s eligibility matters.
The SBA Franchise Directory matters
The SBA maintains a Franchise Directory that lenders use to confirm a brand’s eligibility for SBA financing. If your franchise is listed, the SBA process is smoother. The Directory was reinstated in 2025 — see our SBA franchise loans guide for exactly what that means for you now.
Equipment financing for the build-out
The equipment portion of a build-out can be funded with equipment financing, where the equipment itself is collateral.
Franchisor financing programs
Some franchisors offer or arrange financing for their franchisees — worth asking about, though terms vary widely.
Conventional and startup options
Conventional loans suit strong buyers, and because many franchisees are new owners, our startup business loans guide is relevant too.
How to compare and apply
Have your franchise disclosure documents, projected costs, and your own financials ready. SBA-focused lenders and marketplaces can help you find a fit.
Marketplaces and lenders that work with SBA and franchise financing. Listed alphabetically — not ranked.
| Provider | Type | Often suits | Visit |
|---|---|---|---|
| Fundera by NerdWallet Comparison marketplace covering SBA loans, lines of credit, and equipment financing. | Marketplace | SBA loan comparison | Visit Fundera by NerdWallet (opens in a new tab) |
| Lendio A free marketplace that matches one application to 75+ small-business lenders. | Marketplace | Comparing many lenders at once | Visit Lendio (opens in a new tab) |
| SmartBiz An SBA-focused marketplace that matches applicants to bank partners for SBA and term loans. | SBA marketplace | Streamlined SBA applications | Visit SmartBiz (opens in a new tab) |
The bottom line
Franchise financing covers the fee, the build-out, and working capital — usually through an SBA 7(a) loan, with the brand’s SBA eligibility shaping how smoothly it goes. Check whether your franchise is on the SBA Franchise Directory, get your numbers in order, and confirm current terms directly with the lender.
Frequently asked questions
- How do you finance a franchise?
- Most franchisees use an SBA 7(a) loan, which can cover the franchise fee, build-out and equipment, and initial working capital. Other options include equipment financing for the build-out, franchisor financing programs, and conventional loans. The franchise brand's SBA eligibility affects how smoothly an SBA loan goes.
- Does the SBA fund franchises?
- Yes — franchises are a common use of SBA 7(a) financing. The SBA maintains a Franchise Directory that lenders use to confirm a brand's eligibility; if your franchise is listed, the SBA process is smoother. See our SBA franchise loans guide for how that works now.
- What costs does franchise financing cover?
- Typically the upfront franchise fee, the build-out and equipment for the location, initial inventory, and working capital to cover the first stretch before the business is self-sustaining. A single SBA loan can often bundle these.
Sources
Loan programs, rates, and eligibility change. We re-check sources on the “updated” date, but always confirm current terms directly with a provider.