Buying a franchise offers a head start that independent startups rarely get, including a recognised brand name and a blueprint for operations. However, financing this purchase is distinct from a standard
small business loan, as lenders must evaluate the rules of the franchise alongside your application.

Lenders view franchise lending through a specific lens. Beyond your personal financial health, they assess the strength and track record of the franchise system itself. The “Franchise Agreement” dictates how you operate, and this document heavily influences a lender’s risk assessment. Navigating these differences is critical to securing finance, whether you plan to acquire an operating business or launch a brand-new site.

Important documents needed for a franchise loan

To approve a franchise loan, lenders may also need to look beyond your personal credit history and examine the business model itself. Preparing the correct documentation early can prevent unnecessary delays. While standard financial checks apply, two specific documents often determine the success of an application.

The franchise agreement

This document serves as the rulebook for your business, outlining your tenure, renewal options, and fee structures. Lenders review this to ensure the loan term does not exceed your franchise term or lease. A mismatch between these dates is a frequent cause for rejection.

Business plan and cash flow forecasts

A lender’s confidence relies heavily on the accuracy of your numbers. This is where many applications fall short. Adrian Mula, Director at
Queensland Capital Solutions, explains that lenders look for specific detail rather than broad estimates.

“The most common mistake I see is underestimating ramp up time,” says Mula. “Not including sufficient assumptions and reference material as to how you come to a monthly sales figure and forgetting to build in seasonality.”

Your forecast must reflect the business cycle. If you are buying a resale, base your projections on historical trading data. If you are opening a new location, use benchmarked data provided by the franchisor.

Know the costs of the franchise

Many prospective franchisees focus solely on the initial purchase price listed in the brochure, but the expenses that often jeopardise a deal are the ones buyers fail to anticipate. To secure approval, your loan application must account for the total cost of entry, not just the buy-in fee.

You will need to budget for standard expenses such as franchise fees, royalties, and marketing levies. Beyond these, fit-out costs and equipment standards are often non-negotiable and significant.

The hidden costs

Borrowers frequently overlook the ancillary costs required to get the doors open.

“Depending on the franchise it can be common for new borrowers to underestimate costs such as training fees, lease bonds, fit out or refurbishment costs – and working capital in some cases,” says Mula.

Accurately calculating these figures allows you to apply for the correct funding amount. This prevents the dangerous scenario of running out of cash before the business has generated enough revenue to cover its own overheads.

✔️ Checklist: Have you factored in these costs?
Training fees – Mandatory courses for you and your staff.
Lease bonds – Bank guarantees often required by landlords (3–6 months’ rent).
Fit-out & equipment – Refurbishment costs or new machinery.
Legal & accounting fees – For reviewing the franchise agreement.
Working capital – 3 months of operating expenses (wages, rent, stock) to cover the ramp-up phase.

How to best apply for a franchise business loan?

Getting approval depends on preparation. Lenders want to see that you have a clear financial roadmap and “skin in the game,” meaning your own capital invested alongside theirs.

1. Do your homework

Before approaching a lender, create a “funding table.” This is a clear breakdown of exactly where every dollar is coming from and where it is going.

“Do your homework on the business, and ensure your funding table,
business plan and cash flow forecast are solid,” advises Mula. “Lenders love detail so the quality of your supporting information is key.”

Lenders want to see exactly how the money will be used.

Example: Simple Funding Table

Uses of Funds (Costs) Amount Sources of Funds (Capital) Amount
Purchase Price $100,000 Personal Savings (Equity) $50,000
Refurbishment $30,000 Business Loan (Required) $100,000
Stock & Training $20,000
Total Project Cost $150,000 Total Funding $150,000

2. Understand the equity split

Most traditional lenders will not fund the entire purchase price. You generally need to contribute a significant portion of the upfront costs yourself, often referred to as your “equity in,” to secure a bank loan.

“The rule of thumb is 50% in, 50% funded by the bank,” notes Mula. “This can be as low as 30% in, 70% funded by the lender in strong scenarios.”

3. Choose the right lender

The size and maturity of the franchise brand usually dictate which lenders will consider your application. Major banks tend to favour “accredited” top-tier brands where they have historical data. If you are joining a smaller system, or if you do not have the 50% deposit required by traditional banks, alternative lenders may offer a solution.