Like a HELOC for your home, but for your franchise business. Access the equity you've built in your franchise to fund expansion, renovations, equipment, or working capital.
Calculate how much equity you can access from your franchise business
Calculate how much equity you can access from your franchise business
Typically 70-80% for franchise equity loans
Connect with franchise equity loan specialists who understand business valuations and can help you unlock the equity you've built in your franchise for growth and expansion.
| Feature | Franchise Equity Loan | Home Equity (HELOC) |
|---|---|---|
| Collateral | Franchise business & assets | Primary residence |
| Loan-to-Value | Up to 80% of business value | Up to 80% of home value |
| Interest Rates | 9.5% - 15% | 8% - 12% |
| Tax Benefits | ✓ Business use deductible | Limited deductibility |
| Use of Funds | ✓ Business expansion, equipment, working capital | Home improvements, personal use |
| Risk to Personal Assets | ✓ Business assets only | ✗ Risk to primary residence |
Professional assessment of your franchise value based on cash flow, assets, and market conditions.
Analysis of business performance, cash flow, and debt service capability.
Review of personal and business credit history and overall creditworthiness.
Customize loan terms, interest rate, and repayment schedule based on your needs.
Quick funding once approved - typically 2-3 weeks from application to closing.
A franchise equity loan allows you to borrow against the equity you've built in your franchise business, similar to how a home equity line of credit (HELOC) works for homeowners. Your franchise business and its assets serve as collateral, enabling you to access capital for expansion, equipment, renovations, or working capital while maintaining 100% ownership of your business.
Franchise equity is calculated by determining your business's fair market value and subtracting any existing debt. Business valuation considers cash flow multiples (typically 2-5x annual cash flow), asset values, franchise brand strength, location quality, lease terms, and market conditions. Most lenders allow borrowing up to 70-80% of the calculated equity value.
Franchise equity loans typically offer lower interest rates than unsecured loans, higher borrowing limits than credit cards, tax-deductible interest for business use, flexible repayment terms, and no restrictions on fund usage. Unlike selling equity to investors, you maintain 100% ownership and control of your business while accessing needed capital.
Most lenders require you to own and operate the franchise for at least 2 years before qualifying for an equity loan. This "seasoning" period allows lenders to evaluate your management performance and business stability under your ownership. However, if you purchased an existing franchise with strong historical performance, some lenders may consider shorter seasoning periods.
Minimum requirements typically include: 2+ years of profitable operation under current ownership, minimum 650 personal credit score, consistent positive cash flow with debt service coverage ratio of 1.25x or higher, sufficient business equity (typically $100K+ in equity), current franchise agreement in good standing, and complete financial documentation including tax returns and financial statements.
The approval process typically takes 2-4 weeks from complete application to funding. This includes business valuation (5-7 days), financial underwriting (7-10 days), and loan documentation (3-5 days). Having organized financial records, current franchise agreements, and working with experienced franchise lenders can expedite the process significantly.
Required documents include: 3 years of business tax returns, 2 years of personal tax returns, current profit & loss statements, balance sheets, franchise agreement and any amendments, lease agreements, bank statements (6 months), business licenses and permits, and personal financial statement. Some lenders may also require franchise disclosure documents (FDD).
Yes, most lenders require a professional business valuation or appraisal to determine your franchise's fair market value and available equity. This is typically conducted by a certified business appraiser familiar with franchise valuations. The appraisal cost (usually $3,000-$8,000) is often paid by the borrower but may be financed into the loan amount.
Franchise equity loan rates typically range from 9.5% to 15% depending on your credit score, business performance, loan amount, and term length. Strong-performing franchises with excellent credit may qualify for rates at the lower end, while newer businesses or those with credit challenges may see higher rates. Rates are usually lower than unsecured business loans but higher than SBA loans.
Loan terms typically range from 5 to 15 years, with 7-10 years being most common. Longer terms result in lower monthly payments but higher total interest costs. The term length often depends on the intended use of funds - shorter terms for working capital or equipment, longer terms for expansion or real estate purchases. Some lenders offer interest-only periods during construction or ramp-up phases.
Common fees include: origination fees (1-3% of loan amount), business appraisal ($3,000-$8,000), legal and documentation fees ($1,500-$3,500), title search and insurance (if real estate involved), and ongoing servicing fees. Total fees typically range from 2-5% of the loan amount. Some lenders allow fees to be financed into the loan amount.
Interest payments are typically tax-deductible when loan proceeds are used for business purposes such as expansion, equipment purchases, renovations, or working capital. However, interest may not be deductible if funds are used for personal purposes. Consult with a tax professional to understand the specific deductibility rules for your situation and ensure proper documentation.
The best use depends on your situation. Use equity for expansion if you have proven growth opportunities with strong ROI potential and adequate cash flow to service additional debt. Use for debt consolidation if you have high-interest debt (credit cards, merchant cash advances) that can be replaced with lower-cost equity financing. Many owners use a combination approach.
Conservative borrowing is recommended - typically 50-70% of available equity rather than the maximum 80%. This maintains a cushion for business value fluctuations and unexpected challenges. Consider your debt service coverage ratio, cash flow stability, and risk tolerance. Leave enough equity as a buffer while accessing sufficient capital for your business goals.
While loan proceeds can technically be used for any purpose, using business equity for personal expenses reduces your business's financial flexibility and may not be tax-deductible. It's generally recommended to use franchise equity loans for business-related purposes that can generate returns to service the debt. Personal use should be limited and carefully considered.
If your franchise value decreases significantly, you may become "upside down" (owing more than the business is worth). However, as long as you can make loan payments and the business remains profitable, this typically doesn't trigger immediate issues. Focus on maintaining strong operations and cash flow. Some lenders may require additional collateral if values decline substantially.