Compare franchise financing options

Looking to open a franchise with an existing brand? Here's what you need to know about franchise financing.

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It’s an incredible undertaking to open up a business — either from the ground up or within an existing franchise. As a future franchisee, you’re probably wondering about the costs to open your doors, how you secure financing and what’s expected by your franchisor. We’ve researched these questions to provide what you need to know before you take the plunge.

Lending Loop Business Loan

  • Min. Loan Amount: $1,000
  • Max. Loan Amount: $500,000
  • Interest Rate: Starting at 5.9%
  • Requirements: Annual business revenue of at least $100,000, at least 1 year in the business, minimum credit score of 600+
  • Borrow up to $500,000
  • Online loan application
  • Receive personalized interest rates

Lending Loop Business Loan

Lending Loop offers personalized loans up to $500,000 for small business owners who have been in business for at least one year and can show an annual revenue of at least $100,000.

  • Min. Loan Amount: $1,000
  • Max. Loan Amount: $500,000
  • Interest Rate: Starting at 5.9%
  • Requirements: Annual business revenue of at least $100,000, at least 1 year in the business, minimum credit score of 600+
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What loan options are available for starting a franchise?

You have several avenues to research when looking into funding your franchise.

  • The franchisor. Many franchisors have in-house financing for specific amounts of debt. Franchisors typically specify how much you can borrow, the length of your repayment term and other conditions of your loan, which can vary greatly among franchisors.
  • Bank loans. Your personal bank or credit union may offer financing options, with many traditional banks offering franchise-specific loans.
  • General purpose business loans. Loans offered by online lenders typically have more competitive interest rates and lower fees than loans from traditional sources like banks and credit unions. You can compare general business loans in our guide here.
  • Canada Small Business Financing Program (CSBFP). With this type of funding, the government back your loan up to a minimum of 75%, with the loan being offered by a bank or other financial institution. Though you can’t pay your franchising fees with this loan, you can use it to purchase any equipment, land, vehicles, etc.
  • Equipment leasing services. Depending on the franchise, you may need to invest in expensive equipment. Most of the time, these pieces are available to lease through the franchisor, but you may need to seek out a third-party supplier if not.
  • Venture capitalists and angel investors. While these avenues are generally thought of for avant-garde startups, you could obtain funding for franchising as well. However, investors require surrendering a percentage of ownership to the person or people providing you financial assistance. Compare business loans versus investors in our guide here.

Top 10 Canadian franchises by number of locations + Startup costs

RankFranchise
IndustryFranchise feeEstimated total startup costs
1Tim HortonsCoffee shop/fast food$50,000$1 million+
2SubwaySandwich shop$15,000$120,000+
3McDonaldsFast food$45,000$1 million+
4Jan-ProCleaning$3,150$50,000+
5A&WFast food$20,000 – $30,000$900,000+
6RemaxReal estate$12,500 – $28,000$40,000+
7Pizza PizzaFast food/delivery$30,000$350,000+
8KFCFast food$45,000$750,000+
9Dairy QueenIce cream/fast food$25,000$400,000+
10Country StyleRestaurant$35,000$430,000+

Business loan options to consider for financing your franchise

Name Product Interest Rate Min. Loan Amount Max. Loan Amount Loan Term Minimum Revenue Minimum Credit Score
SharpShooter Funding Business Loan
5.49% - 22.79%
$1,000
$300,000
6 months - 5 years
$5,000/month
450
SharpShooter Funding offers loans up to $300,000 for small business owners who have been business for at least 100 days and can show a minimum of $5,000 in monthly deposits ($60,000/year).
Lending Loop Business Loan
5.90% - 26.50%
$1,000
$500,000
3 months - 5 years
$100,000/year
600
Lending Loop offers personalized loans up to $500,000 for small business owners who have been in business for at least one year and can show an annual revenue of at least $100,000.
Company Capital Business Loan
7% - 29%
$5,000
$100,000
3-18 months
$5,000/month
N/A
Company Capital offers business loans of up to $100,000 to small business owners who have been operating for at least 6 months and can show a minimum of $5,000 in monthly revenue.

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How do I compare my financing options?

Now that you have a better idea of startup costs, here’s what to keep an eye out for when weighing your options.

  • Your eligibility. Each franchisor has its own set of requirements for you to meet, and from there you’ll need to meet the criteria any lenders have. Confirm eligibility with the providers you’re interested in to see whether you meet their minimum standards. If not, you have the option of learning what you can change to make the cut – and then keep exploring other providers.
  • Type of loan. Many types of business loans need to be secured by collateral, whether that’s by your mortgage, investment accounts, vehicle, life insurance or other assets.
  • Loan amount. Getting as close to what you need without going too far over that amount is an important part of getting financing. When you get only what you need, you can prevent yourself from paying unnecessary interest. But if you don’t have enough liquidity, you could get enough financing to have some serve as working capital outside of your startup costs.
  • Loan term. Your loan term is a major factor because it determines how much you end up paying per month and how much you end up paying in interest. A shorter loan term means higher monthly repayments, but it also means a lower overall cost.
  • Interest rate. Lenders determine your interest rate by weighing many factors, but your personal credit score and business plan are two of the most important. If you opt for a secured loan and offer up strong collateral, the lender will see you as less of a risk. When you’re perceived as less risky, your interest rate is generally lower.
  • Fees and costs. Watch out for origination, underwriting and early repayment fees. If a lender provides an APR, it includes the interest rate plus any upfront fees. Early repayment can be a conditional fee and is not reflected in the APR, so it’s a good idea to carefully read through the terms of your loan offer before accepting it. Learn more about business loan costs in our guide here.

What do I need to apply?

Once you’ve narrowed down the type of financing you’d like to apply for, it’s time to fill in and submit your application. Here are several things that most business lenders will ask for:

  • A fully prepared business plan.
  • Your personal banking and income documents.
  • Your personal asset and liability documents.
  • Your down payment or proof of collateral (if it’s a secured loan).
  • Details of what the loan is for and how much you need.

8 quick tips on getting financing for a franchise

  1. Read the franchise disclosure document (FDD) provided by your franchisor carefully to fully understand the costs specific to the franchise you’re representing.
  2. After you read the FDD, clear up any lingering questions with the franchisor, ensuring that you fully understand the costs of opening a franchise.
  3. Put together a well-polished plan that shows you’re ready for the responsibility of borrowing a large amount of money.
  4. If offered, get pre-approval from your top choice lenders.
  5. Get to know your local small business associations.
  6. Talk to other franchisees in the area.
  7. Practice selling yourself as a business owner.
  8. If you get rejected for financing, don’t give up. You may have other options if you do your research.

5 tips on running a successful franchise (source: Franchise Gator)

  • Be the biggest fan of your locations. Create a welcoming atmosphere for your employees and customers alike. Celebrate successes, and reward those who are working just as hard as you.
  • Understand and be understood. You’re in charge of shaping your team — make sure it’s one based on clear communication and honesty. The same should be extended to your franchisor.
  • A little optimism goes a long way. Let’s face it, today’s world can make it hard to be positive sometimes. Try to keep things on the up and up, and work toward solutions while treating problems as learning experiences.
  • Safety in all things. It’s good to know when to take risks, but that should be offset by using detailed strategies for when things don’t go the right way.
  • Trust your franchisor. You did your homework to choose a franchisor that’s a good fit — and a good investment. Trust them to do the right thing for the company as a whole.

Bottom line

Opening up a franchise is a huge undertaking that takes no shortage of time and effort. Once you’ve done your homework to find a franchisor you want to work with, you’ll want to review the financing options available to you so you can get the ball rolling. When you’re taking out financing, be sure to work with a reputable lender, getting only the amount of financing that you actually need.

Frequently asked questions about franchising

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