(Ultimate 2025 Guide)
If you’re serious about investing in a franchise but unsure how to fund it, you’re not alone. One of the most common questions we hear at Better Days Franchise Co. is: “What are my franchise funding options?”The good news? There are more ways to fund a franchise than most people realize. Whether you're ready to dive in full-time or looking for semi-absentee opportunities, there’s a funding path that can work for you—if you know where to look.In this ultimate guide, we’ll break down the most popular franchise funding options, their pros and cons, and tips for choosing the right one based on your situation.
SBA loans are one of the most popular ways to fund a franchise—especially for first-time business owners. Backed by the government, SBA loans reduce risk for lenders, making it easier for you to qualify.
Pros:
• Low down payments (often 10-20% of the total project cost).
•Longer repayment terms (up to 10 years for business loans; 25 years for real estate).
• Competitive interest rates compared to other loans.
Cons:
• Lengthy approval process—it can take 60-90 days to secure an SBA loan.
• Requires strong credit (typically 680+), collateral, and personal guarantees.
• Involves significant paperwork and documentation.
Pro Tip: Not all franchises are SBA-approved. Ask franchisors if they are listed in the SBA Franchise Directory for smoother processing.
ROBS lets you use retirement funds (like a 401(k) or IRA) to fund your franchise—without taxes or penalties. This method is often misunderstood but can be a smart move for the right investor.
Pros:
• No loan to repay—you’re using your own money.
• Can fund your entire franchise investment, including working capital.
• Avoids early withdrawal penalties or taxes.
Cons:
• Complex setup (requires forming a C-Corp and creating a retirement plan for the business).
• Requires strict IRS compliance (typically needs a third-party administrator).
• Risk of losing retirement funds if the business fails.
Pro Tip: Work with an experienced ROBS provider to ensure compliance. Don’t DIY this process!
Banks sometimes offer small business loans for franchise investments—but these are harder to qualify for than SBA-backed options.
Pros:
• Straightforward for experienced borrowers with great credit.
• May offer custom terms based on relationships with the bank.
Cons:
• High credit and collateral requirements.
• Shorter repayment terms than SBA loans, which may stress cash flow.
• Banks may hesitate to lend to first-time owners or newer brands.
Pro Tip: Build relationships with banks early and present a robust business plan, including franchise earnings data.
If you own a home with equity, you can tap into it to fund your franchise.
Pros:
• Lower rates than unsecured loans.
• Quick access to large amounts of capital.
• Flexible terms.
Cons:
• Puts your home at risk—if your business fails, you could lose your property.
• Variable interest rates (HELOCs).
Pro Tip: Only use this if you’re confident in the brand's profitability—and back it up with a contingency plan.
Some franchisors offer direct financing, especially for fees, equipment, and build-outs.
Pros:
• Fast and franchise-friendly.
• Possible deferred payments to give you breathing room.
Cons:
• Often limited in scope—may not cover all costs.
• May include higher rates than banks or SBA.
Pro Tip: This program is an absolutely rarity, so don’t expect the franchisor to offer it. And if they do, always compare franchisor financing against outside options for fairness.
For equipment-heavy franchises (like fitness or food), leasing can preserve cash.
Pros:
• Conserves working capital.
• Easier qualification than loans.
• Payments are predictable and tax-deductible.
Cons:
• More costly over time.
• You don’t own the equipment.
Pro Tip: Combine leasing with other financing to optimize startup capital.
Using personal savings is the simplest way to fund a franchise—if you have enough.
Pros:
• No debt or interest.
• Full ownership and control.
Cons:
• All risk is on you—no safety net.
• May limit funds available for growth or emergencies.
Pro Tip: Keep a reserve for emergencies—even if you use cash.
Sometimes, personal networks can help finance a franchise.
Pros:
• Flexible, negotiable terms.
• Quick access to capital.
Cons:
• Risk to relationships if things go south.
• Informal deals can lead to misunderstandings.
Pro Tip: Treat this like any business deal—use contracts, not handshakes.
Choosing the right funding method depends on:
Available assets—home equity, retirement funds, cash.
Credit profile—score, debt, collateral.
Total investment—startup, fees, working capital.
Risk tolerance—what are you willing to risk?
Example Scenarios:
Low cash, great credit? SBA loans.
Big retirement savings? ROBS.
Equity-rich homeowner? HELOC.
High net worth? Cash or private partners.
At Better Days Franchise Co., we know that finding the right funding option is often what makes or breaks a franchise investment. And here’s the reality—not all lenders are created equal.
With 100+ collective years of franchise experience on our team, we've seen firsthand which lenders and funding partners truly understand franchising—and which don’t.
Over time, we've built strong relationships with the nation’s leading franchise funding institutions, giving our clients priority access to programs and rates that aren’t always easily available to the public.
What does that mean for you?
Preferential programs specifically designed for franchise buyers.
Direct introductions to trusted funding partners who understand franchise business models—so you don’t waste time educating a bank that doesn’t "get" your opportunity.
Better terms, better rates, and faster approvals because you’re working with experts who already know what it takes to fund a franchise the right way.
Bottom line—we don’t just help you pick the right franchise, we help you secure the funding to make it a reality—on terms that set you up for success.
Talk to our team at Better Days. We’ve vetted the top franchises and know which funding methods work best for each. Don’t gamble your future—let’s get it right, together.