Quick answer
Franchise finance is borrowing to buy a new or existing franchise: the franchise fee, fit-out, equipment, stock and early working capital. Banks often lend more readily to established brands they have assessed, sizing the loan on the system's track record and your own contribution. The loan term is usually tied to the franchise agreement or lease. Equipment finance, property-secured loans and vendor finance can fill the rest.
Key points
- Covers the franchise fee, fit-out, equipment, stock and working capital, often with different products for each
- Some banks keep lists of accredited franchise brands, which can make approval smoother
- The loan term usually can't run past the remaining franchise agreement or lease
- Expect to contribute your own cash; goodwill on its own is hard to borrow against
- The disclosure document and key facts sheet are your best due diligence on the brand
- Funds
- Fee, fit-out, equipment, stock, working capital
- Term
- Tied to the franchise agreement or lease
- Security
- Business assets, equipment, property
- Key documents
- Disclosure pack, key facts sheet, business plan
Buying a franchise is part business purchase, part start-up and part long-term contract. That mix is exactly why lenders treat it differently. They aren’t only judging you; they’re judging the brand, the site, the length of your agreement and how other franchisees in the network are actually trading. Get those pieces in order and franchise finance can be one of the more approachable forms of business lending. Skip them and even a strong applicant can stall.
What are you actually paying for?
Break the purchase into parts before you talk to a lender. Each part suits a different kind of finance.
| Cost | Typical finance | Why |
|---|---|---|
| Franchise fee (the right to trade under the brand) | Your own cash, or a loan secured by property | It’s intangible, so there’s nothing for a lender to repossess |
| Fit-out (shop, kitchen, signage) | Bank franchise loan, shop fit-out funding | Tied to the premises and the lease term |
| Equipment (ovens, vehicles, POS, machinery) | Equipment finance or a chattel mortgage | The equipment secures itself |
| Opening stock | Working capital loan or supplier terms | Turns over quickly |
| Working capital (wages and rent while trade builds) | Overdraft, line of credit or a buffer within the main loan | New sites rarely break even in month one |
| Goodwill (resale franchises) | Acquisition loan, vendor finance, property security | Valued on the outlet’s past profit |
NAB, which runs a specialist franchise team, says most franchise opportunities it sees start from around $250k. At that size, financing all of it on a single unsecured loan is rarely realistic; splitting the purchase lets each part be funded on its best terms.
How lenders assess a franchise loan
Lenders look at two businesses at once: yours and the franchisor’s.
The franchise system. How long has the brand operated? How many outlets have closed or changed hands lately? Does the franchisor support struggling franchisees? NAB describes its approach in three parts: character (your commitment and plan), capacity (repaying within the agreement term) and collateral, which for franchises includes intangibles such as brand strength and demand.
Accreditation. Several Australian banks pre-assess franchise systems and keep lists of brands they’re comfortable lending to, sometimes with agreed lending guidelines. NAB says its own accredited and preferred brand list has grown from 10 to 27. If your brand is on a bank’s list, approval tends to move faster and with clearer expectations. Ask the franchisor directly which lenders it works with.
The term. This is the detail first-time buyers miss. Lenders generally won’t let a loan run past the time left on your franchise agreement or premises lease, because once either ends, the income that repays the loan may end too. A five-year agreement with one five-year option often means a loan of five years, not ten. Shorter terms mean higher repayments, so run the numbers in the business loan repayment calculator before you sign anything.
You. Relevant experience, your cash contribution, your credit file, and a business plan that uses realistic figures rather than the brochure’s best case.
Do your due diligence before the lender does
Australia’s Franchising Code of Conduct gives prospective franchisees a useful toolkit, and a lender will expect you to have used it.
- The disclosure pack. Before you sign or pay non-refundable money, the franchisor must give you its disclosure document, a key facts sheet, the information statement and the proposed agreement, generally at least 14 days ahead. Read the sections on the franchisor’s financial position, past disputes, and expected capital expenditure such as refurbishments.
- The franchise disclosure register. A free Australian Government register where you can search franchise profiles and compare information across brands before you commit.
- Cooling off. New franchisees generally have a short cooling-off window after signing. Don’t rely on it as your research time; do the work first.
- Talk to current and former franchisees. Their actual trading figures are worth more than any projection.
business.gov.au also points out a risk that matters for borrowers: if a franchisor fails, franchisees can lose access to stock or the brand, and may lose assets they borrowed against. That’s one reason lenders care so much about the franchisor’s health.
If your bank is taking its time with a franchise application, a quick enquiry with us can show you what else is available. It doesn’t involve a credit check.
A worked example
A couple in Toowoomba is buying an established outlet of a national café brand for $420k, including $60k of equipment and $25k of stock. The franchise agreement has seven years left. Their figures:
- Their cash: $120k from savings
- Equipment finance: $55k over five years against the coffee machines, ovens and fridges
- Bank franchise loan: $245k over seven years, matching the remaining agreement, secured over the business with a top-up of security from their home
- Working capital: a $30k overdraft for winter and the first BAS quarter
The bank tested the outlet’s last two years of profit against the combined repayments and allowed a wage for the owners first, so the loan worked only because the store’s real numbers supported it. Had the agreement had only three years left, the same loan would have been far harder to service and the purchase price would have needed rethinking. Our break-even calculator is a good way to stress-test a target before you make an offer.
When the bank says no
Banks are great franchise lenders when the brand and buyer fit. When they don’t (a young brand with no bank accreditation, a buyer with an old default, or a purchase that needs to settle before a bank can decide), other routes include:
- Non-bank lenders with their own franchise and acquisition appetite. See non-bank business loans.
- Property-secured loans against a home or investment property, which can cover the franchise fee and goodwill that unsecured lenders won’t.
- Vendor finance on a resale, where the outgoing franchisee accepts part of the price over time.
- Equipment finance for the hard assets, reducing what the main loan needs to cover.
For a full walk through the purchase itself, our guide on how to fund a franchise and the buying a franchise page go step by step.
Let’s talk about your franchise plans
Buying into a brand is a big commitment, and the finance should fit the agreement you’re signing, not the other way around. If you’d like a second view on how to structure it, we’re happy to help.
The form takes around a minute and asking doesn’t touch your credit rating. We don’t hand your details to a queue of lenders; one team works on it. An actual person looks at your franchise, your numbers and your timing, then phones you. Fill it in with real figures, including the brand and the term left on the agreement, so the first option we suggest is the right one.
Frequently asked questions
How much deposit do I need to buy a franchise?
There's no single rule. Lenders want to see a meaningful cash contribution from you, and the amount depends on the brand, whether the lender has assessed that franchise system, and what other security you can offer. Property security can reduce the cash you need to put in.
Can I get franchise finance with no business experience?
Often, yes, because the franchisor provides the system, training and support. Lenders will still want to see relevant skills such as management, sales or hospitality experience, a realistic business plan and evidence you've completed the franchisor's training.
Is it easier to finance a new franchise or buy an existing one?
An existing franchise has real trading figures, which lenders like because they can test the cash flow. A new site relies on the franchisor's projections and the network's averages. Resale purchases are often assessed more like a business acquisition, with a focus on actual profit.
What does a bank-accredited franchise mean?
Some banks review franchise systems in advance and agree to lend to franchisees of those brands on set terms. It can speed up approval and give clearer lending guidelines. Ask your franchisor which banks it has relationships with.
Can the franchise fee be financed?
It can be part of a larger loan, but because it's an intangible right rather than a physical asset, lenders usually want it covered by your contribution or by other security such as property. Fit-out and equipment are easier to finance on their own.
What if a bank declines my franchise loan?
Non-bank lenders, equipment financiers and property-secured lenders can fund franchises the banks won't, particularly newer brands or buyers with credit history issues. The cost is usually higher, so keep the borrowed amount as tight as the plan allows.