Starting a franchise is one of the most reliable paths to entrepreneurship. You get a proven business model, brand recognition, and operational support, but one major hurdle stands in the way—financing. If you’re wondering how to finance a franchise, you’re not alone. Many aspiring franchise owners face this challenge, but with the right funding strategy, owning a franchise is more attainable than you think.
In this guide, we’ll explore the best options available to finance your franchise investment, including secured lines of credit, SBA loans, and retirement account rollovers.
1. Secured Lines of Credit
A secured line of credit is an excellent option for financing a franchise, particularly if you have valuable assets to leverage. These options allow you to borrow against the equity in your home, real estate holdings, or investment portfolios.
Tap into Home Equity with a Home Equity Line of Credit (HELOC) or Refinance
If you own a home and have built equity over time, a home equity line of credit (HELOC) or a cash-out refinancecan provide the funds needed to finance your franchise.
- HELOC: A HELOC allows you to borrow against your home equity while maintaining a revolving line of credit. This is beneficial because you only pay interest on the amount you use.
- Cash-out Refinance: With a refinance, you replace your current mortgage with a new one for a higher amount and receive the difference in cash. This can provide a lump sum to cover franchise costs.
Pros:
- Lower interest rates compared to unsecured loans
- Large borrowing capacity depending on home value
- Flexible repayment terms
Cons:
- Your home serves as collateral, meaning there’s risk if you default
- Approval depends on home equity and credit score
Real Estate Portfolio Loans
For individuals who own investment properties, leveraging a real estate portfolio can be an excellent financing method. Real estate portfolio loans allow you to borrow against the value of multiple properties at once, providing a sizable amount of capital for your franchise.
Pros:
- Can provide a significant amount of capital
- Interest rates may be lower than unsecured loans
- Allows you to use investment properties rather than personal assets
Cons:
- Approval depends on real estate valuation and rental income
- Risk of foreclosure on multiple properties if repayments are not met
Stocks & Securities Portfolio Loans
If you have a substantial investment portfolio, you can obtain a securities-backed line of credit. This allows you to borrow against your stock holdings without liquidating them.
Pros:
- No need to sell investments, allowing continued market growth
- Interest rates are typically lower than credit cards or unsecured loans
- Quick access to funds
Cons:
- Market fluctuations may impact your loan terms
- If stock values drop, you may have to provide additional collateral
2. SBA Loans
The U.S. Small Business Administration (SBA) provides one of the best loan options for financing a franchise. SBA loans offer low-interest, long-term financing backed by the federal government, making them attractive for franchisees.
Our Franchise is SBA Approved
We work with a third-party lender who specializes in SBA loans, ensuring a smooth financing process for qualified applicants. Many other cleaning franchises lack the financial strength required for SBA approval, making this an exclusive advantage.
Get Started with as Little as 10% Down
One of the most appealing aspects of an SBA loan is the ability to start your franchise with a down payment as low as 10% of the total investment. This means you could launch your business with as little as $10,000 down if your franchise investment is $100,000.
How SBA Loans Work
SBA loans are not directly issued by the government but instead guaranteed by the SBA and issued through approved lenders. The most common option is the SBA 7(a) loan, which provides up to $5 million in funding.
Pros:
- Low down payment requirements
- Long repayment terms (10-25 years)
- Lower interest rates compared to traditional business loans
Cons:
- Lengthy approval process
- Requires strong financials and business plan
3. Retirement Funds (401(k) Rollover for Business Startups – ROBS)
Another popular method for financing a franchise is utilizing retirement savings through a 401(k) Rollover for Business Startups (ROBS). This strategy allows you to use your retirement funds to invest in a franchise without incurring early withdrawal penalties or taxes.
How ROBS Works
- A C-corporation is established for your franchise business.
- A new 401(k) plan is created within this corporation.
- Your existing retirement funds roll over into the new 401(k).
- The new 401(k) invests in the franchise business, providing capital for startup costs.
Our Trusted ROBS Partner
We work with a third-party provider who specializes in setting up ROBS structures, ensuring compliance and a seamless transition of funds.
Pros:
- No loan repayments or interest
- No early withdrawal penalties or taxes
- Allows full control of retirement funds for business investment
Cons:
- Complex legal structure requiring compliance monitoring
- Your retirement funds are tied to the success of the franchise
Choosing the Best Financing Option
Each financing method has unique advantages, and the best choice depends on your financial situation, risk tolerance, and long-term business goals. Here’s a quick comparison to help you decide:
| Financing Option | Best For | Pros | Cons |
|---|---|---|---|
| HELOC / Refinance | Homeowners with equity | Low interest, high borrowing power | Risk of losing home if defaulted |
| Real Estate Portfolio | Property investors | Uses rental income to fund business | Risk tied to property values |
| Stocks & Securities | Investors with a portfolio | No need to sell assets | Subject to market fluctuations |
| SBA Loan | Strong financial candidates | Low interest, long terms | Lengthy approval process |
| ROBS (401k Rollover) | Retirement savers | No loan or interest payments | Retirement funds at risk |
Final Thoughts
Understanding how to finance a franchise is the first step toward business ownership. Whether you leverage home equity, secure an SBA loan, tap into investments, or use retirement funds, each method has its benefits. The key is choosing a financing strategy that aligns with your financial situation and long-term goals.
Our franchise is structured to make financing as accessible as possible, with SBA loan approval, ROBS facilitation, and expert guidance through the process. If you’re ready to take the next step toward franchise ownership, reach out today to explore your financing options and start your entrepreneurial journey!
The Assett Commercial Cleaning Franchise Opportunity
If you’re ready to take the first step, submit your interest form today and start exploring your future as a franchise owner! We will review your commercial cleaning franchise startup costs, marketing strategies, earnings potential, and more. We have a great franchise team and we’re eager to welcome you into the Assett brand!
