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Complete Franchise Loan Types Comparison

Compare all franchise financing options side-by-side. Understand rates, terms, requirements, and find the best loan type for your specific franchise situation.

SBA 7(a)EquipmentWorking CapitalExpansionMerchant Cash AdvanceFranchise Equity

Detailed Loan Type Comparison

SBA 7(a) Loans
9.5% - 12.5%
Interest Rate

Key Terms

Amount: $50K - $5M
Term: 10-25 years
Down Payment: 10-15%
Approval Time: 60-90 days
Credit Score: 650+ (600+ possible)
Collateral: Often required

Best For

  • New franchise purchases
  • Expansion to new locations
  • Major renovations
  • Working capital needs

Advantages

  • Lowest interest rates
  • Longest repayment terms
  • Government backing
  • Lower down payments
  • No prepayment penalties

Disadvantages

  • Longest approval time
  • Extensive paperwork
  • Government fees (2-3.5%)
  • Strict eligibility requirements

Equipment Financing
8% - 14%
Interest Rate

Key Terms

Amount: $25K - $500K
Term: 3-7 years
Down Payment: 0-20%
Approval Time: 1-7 days
Credit Score: 600+
Collateral: Equipment serves as collateral

Best For

  • Kitchen equipment
  • POS systems
  • Delivery vehicles
  • Technology upgrades

Advantages

  • Fast approval
  • Equipment as collateral
  • 100% financing possible
  • Flexible terms

Disadvantages

  • Higher rates than SBA
  • Shorter repayment terms
  • Equipment-specific use
  • Depreciation risk

Working Capital
12% - 25%
Interest Rate

Key Terms

Amount: $10K - $500K
Term: 6 months - 3 years
Down Payment: 0%
Approval Time: 24-48 hours
Credit Score: 550+
Collateral: Usually unsecured

Best For

  • Inventory purchases
  • Payroll gaps
  • Seasonal fluctuations
  • Marketing campaigns

Advantages

  • Fastest approval
  • No collateral required
  • Flexible use of funds
  • Quick access to cash

Disadvantages

  • Highest interest rates
  • Shortest terms
  • Lower loan amounts
  • Daily/weekly payments

Expansion Loans
10% - 16%
Interest Rate

Key Terms

Amount: $100K - $3M
Term: 5-15 years
Down Payment: 15-25%
Approval Time: 2-6 weeks
Credit Score: 650+
Collateral: Business assets

Best For

  • Multi-unit development
  • Territory expansion
  • Franchise acquisitions
  • Large renovations

Advantages

  • Higher loan amounts
  • Growth-focused
  • Competitive rates
  • Flexible structures

Disadvantages

  • Requires business history
  • Higher down payments
  • More complex approval
  • Personal guarantees

Merchant Cash Advance
20% - 50% APR
Interest Rate

Key Terms

Amount: $5K - $250K
Term: 3-18 months
Down Payment: 0%
Approval Time: Same day
Credit Score: 500+
Collateral: Future receivables

Best For

  • Emergency funding
  • Very poor credit
  • Immediate cash needs
  • Short-term gaps

Advantages

  • Same-day funding
  • Very low credit requirements
  • No fixed payments
  • Easy approval

Disadvantages

  • Extremely high costs
  • Daily collections
  • Revenue-based payments
  • Debt cycle risk

Franchise Equity Loans
9% - 15%
Interest Rate

Key Terms

Amount: $50K - $2M
Term: 5-15 years
Down Payment: 0%
Approval Time: 2-4 weeks
Credit Score: 650+
Collateral: Business equity

Best For

  • Debt consolidation
  • Expansion funding
  • Personal use
  • Cash-out refinancing

Advantages

  • Access business equity
  • Competitive rates
  • Flexible use
  • No down payment

Disadvantages

  • Requires established business
  • Business as collateral
  • Complex valuations
  • Limited availability

Quick Comparison: Category Winners

Speed of Funding

Winner: Merchant Cash Advance
Runner-up: Working Capital

Lowest Interest Rates

Winner: SBA 7(a) Loans
Runner-up: Equipment Financing

Highest Loan Amounts

Winner: SBA 7(a) Loans
Runner-up: Expansion Loans

Easiest Approval

Winner: Merchant Cash Advance
Runner-up: Working Capital

Best for Poor Credit

Winner: Merchant Cash Advance
Runner-up: Working Capital

Longest Terms

Winner: SBA 7(a) Loans
Runner-up: Expansion Loans

Most Flexible Use

Winner: Working Capital
Runner-up: SBA 7(a) Loans

Best Overall Value

Winner: SBA 7(a) Loans
Runner-up: Equipment Financing

Scenario-Based Loan Recommendations

Find the best loan type for your specific situation and franchise goals.

First-Time Franchise Buyer

New to franchising, good credit, need comprehensive financing

Recommended: SBA 7(a) Loan

Lowest rates, longest terms, and government backing reduce risk for new franchisees

Alternative Options:

  • Equipment Financing for specific needs
  • Franchise Equity Loan if converting existing business

Multi-Unit Expansion

Existing franchisee looking to add 2-3 locations

Recommended: Expansion Loan or SBA 7(a)

Higher amounts available, proven track record helps approval, growth-focused lenders

Alternative Options:

  • Franchise Equity Loan using existing business equity
  • Multiple Equipment Financing deals

Equipment Upgrade

Need new kitchen equipment, POS systems, or vehicles

Recommended: Equipment Financing

Fast approval, equipment as collateral, 100% financing possible

Alternative Options:

  • SBA 7(a) if part of larger renovation
  • Working Capital for smaller purchases

Seasonal Cash Flow Gap

Temporary cash flow issues, need bridge funding

Recommended: Working Capital Line of Credit

Fast access, flexible repayment, only pay interest on amount used

Alternative Options:

  • Merchant Cash Advance for emergency
  • Equipment refinancing

Poor Credit (Under 600)

Credit challenges but strong business performance

Recommended: Working Capital or MCA

Lower credit requirements, faster approval, revenue-based options

Alternative Options:

  • Equipment Financing with equipment as collateral
  • Revenue-based financing

Debt Consolidation

Multiple high-interest debts, want to simplify payments

Recommended: Franchise Equity Loan or SBA 7(a)

Lower rates than existing debt, single payment, access to business equity

Alternative Options:

  • Expansion Loan if planning growth
  • Working Capital for short-term consolidation

Loan Selection Decision Matrix

Loan TypeSpeedRateAmountCredit Req.Overall
SBA 7(a)★★☆☆☆★★★★★★★★★★★★★☆☆★★★★☆
Equipment★★★★★★★★★☆★★★☆☆★★★☆☆★★★★☆
Working Capital★★★★★★★☆☆☆★★☆☆☆★★☆☆☆★★★☆☆
Expansion★★★☆☆★★★☆☆★★★★☆★★★☆☆★★★☆☆
MCA★★★★★★☆☆☆☆★★☆☆☆★☆☆☆☆★★☆☆☆
Equity Loan★★★☆☆★★★★☆★★★★☆★★★☆☆★★★☆☆

Rating Scale: ★★★★★ Excellent | ★★★★☆ Good | ★★★☆☆ Average | ★★☆☆☆ Below Average | ★☆☆☆☆ Poor

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