How to Finance a Franchise: SBA Loans, ROBS, and Other Options

For many people who dream of owning a franchise, the first real question is not “which brand?” but “how would I pay for it?” The good news is that franchise buyers have several well-established financing paths. The right mix depends on your savings, credit, risk tolerance, and the total investment disclosed in the franchise’s FDD. This guide explains the most common options in general terms so you can walk into lender and advisor conversations prepared. It is educational, not financial or legal advice, so always work with a qualified accountant, lender, and attorney.

Step 1: Know the real number you are financing

Before you think about loans, understand the full cost. Every franchise discloses its initial fees in Item 5 of the Franchise Disclosure Document and its estimated initial investment in Item 7. Item 7 usually covers real estate and buildout, equipment, opening inventory, training travel, and “additional funds” for the first months of operation. Learn more in our guide to how to read a Franchise Disclosure Document.

Then add your personal side of the equation: living expenses while the business ramps up, health insurance if you are leaving a job, and an emergency cushion. Lenders will want to see that you have thought this through.

Step 2: Get your financial house in order

• Check your credit. Pull your credit reports and fix errors early.
• Document your liquidity and net worth. Franchisors and lenders commonly ask for a personal financial statement.
• Write a business plan. The SBA offers a free guide to writing a business plan, and an SBDC advisor can review it at no cost.
• Build your own projections with an accountant, using the FDD and local quotes for rent and buildout.

Option 1: SBA-backed loans

The U.S. Small Business Administration does not usually lend money directly. Instead, it guarantees a portion of loans made by participating banks, which can make lenders more willing to finance a new business.

SBA 7(a) loans

The SBA 7(a) program is the most common SBA loan for small businesses and is widely used by franchise buyers for working capital, equipment, buildout, and in some cases the franchise fee. Terms, rates, and down payment requirements depend on the lender and program rules, so compare several lenders.

SBA 504 loans

SBA 504 loans are designed for major fixed assets such as real estate or long-life equipment. They are less common for leased retail spaces but can be useful if you plan to buy property.

The SBA Franchise Directory

The SBA maintains a Franchise Directory of brands whose agreements are eligible for SBA financing. Ask your lender to check whether a franchise you are considering is listed.

Option 2: ROBS (Rollovers as Business Start-ups)

A ROBS arrangement lets some buyers use eligible retirement funds to capitalize a new business without taking a taxable distribution. It typically involves setting up a C corporation and a new retirement plan that buys stock in that corporation. ROBS can be powerful, but it is complex and has strict compliance requirements. The IRS has a ROBS compliance project that explains common pitfalls. If you consider ROBS, work with an experienced provider, a CPA, and an attorney, and understand that you are putting retirement savings at risk.

Option 3: Personal savings and home equity

Many owners fund part of their investment from savings, which lenders often expect as a down payment anyway. Some use a home equity loan or line of credit. These options can be simpler than a business loan but put personal assets at risk, so discuss them with your family and financial advisor.

Option 4: Partners and investors

Bringing in a partner can reduce the capital you need and add skills to the business. It also adds complexity. Put roles, decision-making, profit sharing, and exit terms in a written agreement prepared by an attorney, and make sure the franchisor approves the ownership structure.

Option 5: Equipment financing and leasing

Equipment lenders and leasing companies finance specific assets, such as coolers, blenders, or point-of-sale systems, using the equipment as collateral. This can preserve cash for working capital.

Option 6: Franchisor financing

Some franchisors offer financing or relationships with preferred lenders. Item 10 of the FDD discloses any financing the franchisor offers. Compare those terms with outside options.

Preparing for the lender meeting

Lenders see many franchise loan requests. You stand out by being organized. Before your first meeting, assemble:

• A personal financial statement and recent tax returns
• Your resume, with management and customer-facing experience highlighted
• The franchise’s FDD and a summary of Items 5–7
• A business plan with a local market analysis and realistic monthly projections
• A sources-and-uses table showing exactly where every dollar comes from and where it goes
• Any letter of intent or quotes for your proposed site

Ask each lender about the loan types they recommend, the down payment they expect, collateral and personal guarantee requirements, how long approval usually takes, and whether they have financed other franchises in the same category. Their answers will help you compare offers on more than just the interest rate.

Timing your financing with the franchise process

Financing and franchise approval usually move in parallel. A common sequence is to get pre-qualified by a lender while you review the FDD, firm up financing after Discovery Day and franchise approval, then finalize the loan once your site and lease are in place. Talk with both your lender and the franchisor about timing so neither side is waiting on the other.

Common mistakes to avoid

• Underfunding working capital. Running out of cash before the business ramps up is a common reason new businesses struggle.
• Relying on informal income estimates. Lenders and you should rely on your own projections and the FDD, not verbal promises.
• Skipping professional advice on ROBS, partnerships, or personal guarantees.
• Shopping only one lender. Terms vary. Compare.

Financing and SuppLife

SuppLife is a family-owned health and wellness retail brand with a flagship store in Bristol, CT, combining a curated supplement and vitamin selection, a shake bar, a lounge, and trained staff. Fee and investment details are in our FDD, provided after inquiry, so you and your lender can work from accurate numbers. We encourage every candidate to review financing with their own advisors. Learn about the SuppLife ownership process, check the franchise FAQ, or read leaving corporate to own a franchise for help planning your transition. Our main franchise page has the full overview.

Frequently asked questions

Can I use an SBA loan to buy a franchise?

Often, yes. SBA 7(a) loans are commonly used by franchise buyers. Eligibility depends on the lender, your qualifications, and whether the franchise agreement meets SBA requirements. Ask your lender to check the SBA Franchise Directory.

What is ROBS and is it safe?

ROBS (Rollovers as Business Start-ups) lets some buyers use eligible retirement funds to capitalize a business. It is legal when set up and maintained correctly, but it is complex and puts retirement savings at risk. Work with experienced professionals and review IRS guidance.

How much money do I need to put down?

It depends on the lender, the loan type, and the franchise. Use Item 7 of the FDD and talk with lenders early to understand typical down payment expectations.

Does the franchisor help with financing?

Some do. Item 10 of the FDD discloses any financing offered by the franchisor or its affiliates.

Where can I find SuppLife investment details?

Fee and investment details are in our Franchise Disclosure Document, provided after you submit an inquiry.

This information is not an offer to sell a franchise. Offers are made only by Franchise Disclosure Document.