1851

Franchising is a great way to take control of your future, but it requires a&nbsp;<a href="https://1851franchise.com/how-much-does-it-cost-to-open-a-franchise-2716258">substantial investment&nbsp;</a>— of both time and money — upfront. In many cases, a franchisee will need to seek some sort of&nbsp;<a href="https://1851franchise.com/how-to-get-financing-to-buy-a-franchise-2714742">financing</a> to cover things like the initial franchise fee, real estate costs, build-out and more.“The majority of people are getting some sort of financing,” explained&nbsp;<a href="https://www.linkedin.com/in/1joshuamarks/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-secure-financing-when-buying-a-franchise-2721862" target="_blank" rel="nofollow">Joshua Marks</a>, an attorney and owner of&nbsp;<a href="https://lawmr.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-secure-financing-when-buying-a-franchise-2721862" target="_blank" rel="nofollow">JM Law Group</a>. “Maybe 80%, if not even more, will need support. I don’t get very many calls from people who can fund the entire startup out-of-pocket. And I’m not just talking about the initial franchise fee, but also build-out costs, startup costs, equipment, working capital… the whole ball of wax.”Marks added, though, that there is a bit of a caveat to this statement. Many people who are coming into franchising later on in their lives choose to roll over their 401ks. So, there is still a bit of paperwork involved, but they aren’t taking a loan, either.&nbsp;“That seems to be increasing as you see older people, specifically from the corporate sector, choosing to get into the franchising world,” he explained.However, if you don’t have a hefty savings account or 401k to roll over, loans are not impossible. According to Marks, one of the most popular sources for loans is the SBA. Some people also use other forms of traditional bank financing.“Typically, rates through the SBA have been better than other forms of financing, and there’s often a lower amount of equity or out-of-pocket required from the franchisee,” Marks added.The SBA also maintains a list of franchises that are pre-approved, meaning that if a franchisee is planning to invest in any of the options on the list, it has already been vetted and determined to meet a certain level of standards as set by the SBA.Throughout this entire process, Marks says one of the most common shortfalls he sees is franchisees not fully understanding the cost associated with the funds they are borrowing. At times, there will be things like “bank’s attorney fees” or prepayment penalties. Even the most well-versed business people can skip over terms like these, especially when the associated costs are not explicitly spelled out.“The bank will oftentimes provide a term sheet and a financing commitment later,” Marks said. “A lot of times, people don’t sit down and take the time to either understand or get some actual hard numbers from the bank regarding what they can expect and the total of all of the costs associated with the loan at the end of the day.”If there is one overarching piece of advice, Marks says, it’s that you have to be extremely organized. When pursuing financing through the SBA, or really any type of major financing through other routes as well, there will be a lot of documents involved. After you evaluate which financing routes will work best for you, begin to gather your data. You’ll need financials, tax returns, bank statements, guarantor information and maybe more.&nbsp;“Oftentimes, the individual is required to guarantee the loan, so you have to think about your personal exposure in undertaking these loans,” he explained.

How To Secure Financing When Buying a Franchise

1851 Franchise

The majority of franchisees will need to seek funding in order to get their franchise off the ground. SBA loans are a common option, but that is not the only way.

how-to-secure-financing-when-buying-a-franchise

Pigtails & Crewcuts

How Pigtails & Crewcuts Franchisees Like Angel Putnam Are Making a Difference Beyond the Salon

The Heart of the Brand: How Pigtails & Crewcuts Franchisees Like Angel Putnam Are Making a Difference Beyond the Salon

pigtails-crewcuts-angel-putnam-community-impact

BIGGBY COFFEE

BIGGBY® COFFEE Recognized on Forbes’ 2026 Best Customer Service List

biggby-coffee-forbes-2026-best-customer-service

Biscuit Belly Franchising

Photo of Chuck Schnatter inside Biscuit Belly location

Why a Former Papa Johns Executive Invested in Biscuit Belly Franchising

franchise-chuck-schnatter

Busy Bee Jumpers

Busy Bee Jumpers Closes 2025 on a High: Three Franchisees Signed in First 30 Days, Expansion Momentum Building

busy-bee-jumpers-franchise-growth-2025

CapitalSpring

What Makes a Successful Franchise Investment Partner: Understanding What To Look For  

What Makes a Successful Franchise Investment Partner: Understanding What To Look For Beyond the Check

franchise-investment-partner-capitalspring

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Development Website Builder

Franchise Resources

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

California Pizza Kitchen’s Sale Is the Latest in the Era of PE-Backed Turnarounds in Franchising

california-pizza-kitchens-sale-is-the-latest-in-the-era-of-pe-backed-turnarounds-in-franchising

Buying a fitness franchise, people exercising

Boutique vs. Big Box Gym Franchises: Which Offers Best ROI in the $7 Billion Fitness Market?

buy-fitness-franchise-boutique-big-box-comparison

Pieology Pizza Enters Chapter 11 Following Costly Bid To Save Struggling Stores

pieology-pizza-files-chapter-11-bankruptcy

CNBC: McDonald’s Will Assess if Franchisees Are Offering Value for Customers Under New Standards

mcdonalds-franchise-standards-value-metric

How AI Is Transforming Restaurant Operations and Franchises

ai-impact-restaurants-franchises-human-centric-technology

image of jerome hanway from right at home Las Cruces, New Mexico 1851 franchise franchisee spotlight

Jerome Hanway Is Building His Right at Home Franchise Around His Mission To Serve

right-at-home-franchise-las-cruces-jerome-hanway

1851 Franchisee Spotlight graphic with photo of Eli Cohen, Layne's Chicken Fingers logo

C5 Restaurants Grows its Texas Footprint with 40 Layne’s Chicken Fingers Locations Planned Statewide

eli-cohen-laynes-chicken-fingers-texas

image of michael panos and michel panos, owners of mellow mushroom in Atlanta

What Makes Mellow Mushroom a Strong Franchise Investment? Insights From the Panos Family’s Metro Atlanta Portfolio

mellow-mushroom-franchise-panos-restaurant-group-metro-atlanta

image of stephen westerman and matthew westerman, owners Fort Walton Beach Two men and a junk truck

Twin Brothers Move From Managers to Owners with New TWO MEN AND A JUNK TRUCK Franchise on the Gulf Coast

How To Secure Financing When Buying a Franchise

MORE STORIES LIKE THIS