Keep your franchise running smoothly with flexible working capital. Fund inventory, payroll, marketing, and seasonal needs without disrupting cash flow.
Get approved in 24-48 hours with funding in 1-3 days
Lines of credit, term loans, or merchant cash advances
Many options available with just business cash flow
Calculate how much working capital you need and compare financing options
Calculate your working capital needs and compare financing options
How much your revenue varies seasonally
Months of expenses to keep as cushion
Connect with working capital specialists who understand franchise cash flow needs. Get competitive rates and flexible terms tailored to your business.
| Option | Amount | Speed | Cost | Best For |
|---|---|---|---|---|
| Business Line of Credit | $10K - $500K | 1-3 days | 8-25% APR | Ongoing cash flow needs |
| SBA Working Capital | $25K - $5M | 30-60 days | 6-12% APR | Large amounts, lower rates |
| Term Loan | $25K - $1M | 1-2 weeks | 10-30% APR | Specific projects, predictable payments |
| Invoice Factoring | Based on invoices | 24 hours | 2-5% per invoice | B2B franchises with invoices |
| Merchant Cash Advance | $5K - $500K | Same day | 20-50% factor rate | Emergency funding, high card sales |
| Equipment Refinancing | Up to 80% of value | 1-2 weeks | 6-15% APR | Established franchises with equipment |
Working capital is the money needed to fund day-to-day operations - inventory, payroll, rent, utilities, and other operating expenses. Franchises need working capital because revenue fluctuates seasonally while many expenses remain fixed. It bridges cash flow gaps, funds growth opportunities, and provides a financial cushion for unexpected expenses or slow periods.
Most franchises need 3-6 months of operating expenses in working capital. For a franchise with $50,000 monthly expenses, that's $150,000-$300,000. New franchises often need more (6-12 months) while established profitable franchises may need less (2-4 months). Seasonal businesses like ice cream shops or tax services may need 6-12 months to cover off-season periods.
Working capital loans provide a lump sum upfront with fixed monthly payments over a set term. Lines of credit work like a credit card - you're approved for a maximum amount and only pay interest on what you use. Lines of credit are better for ongoing, fluctuating needs while term loans work better for specific projects or predictable cash flow gaps.
Speed varies by funding type: Business lines of credit and merchant cash advances can fund in 24-48 hours. Traditional term loans take 1-2 weeks. SBA working capital loans take 30-60 days but offer better rates. Alternative lenders are fastest but most expensive. Having complete financial documentation ready speeds up any application process.
Basic requirements include: minimum credit score of 600-650, business operating for 6+ months (some require 2+ years), minimum monthly revenue of $10,000-$25,000, positive cash flow, and complete financial documentation. Established franchises with strong brands often qualify more easily. Personal guarantees are typically required for amounts over $100,000.
Yes, but it's more challenging. New franchisees typically need: strong personal credit (700+), industry experience, substantial down payment invested, detailed business plan with cash flow projections, and personal guarantees. SBA loans are often the best option for new franchisees. Some franchisors have preferred lender relationships that can help new owners access working capital.
Required documents include: business tax returns (2-3 years), personal tax returns, profit & loss statements, balance sheets, bank statements (3-6 months), franchise agreement, lease agreements, accounts receivable aging (if applicable), and business plan or cash flow projections. Having organized, current documentation significantly speeds approval.
Lenders focus on: cash flow consistency and trends, debt service coverage ratio (typically want 1.25x or higher), personal and business credit scores, industry experience, franchise brand strength, collateral availability, and business growth potential. They want to see that you can service the debt while maintaining operations and that the working capital will improve your business performance.
Choose a line of credit if you have ongoing, fluctuating needs (seasonal inventory, irregular cash flow, ongoing operational expenses). Choose a term loan if you have a specific purpose (equipment purchase, expansion project, debt consolidation) or prefer predictable payments. Many franchises benefit from having both - a term loan for major needs and a line of credit for flexibility.
SBA working capital loans (like SBA 7(a) and Express loans) offer lower interest rates (typically 2-4% below conventional loans), longer terms, and lower down payments. They take 30-90 days to process versus 1-7 days for conventional loans. They're worth waiting for if you can plan ahead, need larger amounts ($50K+), or want to minimize borrowing costs over time.
Consider merchant cash advances only for emergency situations when you need funding within 24 hours and have high credit card sales volume. They're expensive (effective APRs of 20-150%) but provide immediate cash based on future credit card sales. Better for restaurants, retail, or service franchises with consistent card transactions. Avoid for long-term working capital needs.
Invoice factoring works well for B2B franchises (commercial cleaning, business services, logistics) that invoice customers with 30-90 day payment terms. You sell your invoices to a factoring company for immediate cash (typically 70-90% of invoice value). It's expensive (2-5% per invoice) but provides immediate cash flow and eliminates collection hassles.
Use working capital strategically: invest in inventory during slow periods to prepare for busy seasons, fund marketing campaigns to drive revenue, hire and train staff before peak periods, negotiate better supplier terms with volume purchases, and maintain optimal inventory levels to avoid stockouts. Focus on investments that generate more cash flow than the cost of capital.
Establish a line of credit during strong seasons when you qualify easily. Build cash reserves during peak periods to reduce borrowing needs. Create detailed cash flow projections to anticipate needs. Consider seasonal employees rather than year-round staff. Negotiate payment terms with suppliers to match your cash flow cycles. Some franchises benefit from counter-seasonal revenue streams.
Calculate ROI by comparing additional revenue/profit generated versus the cost of capital. For example: if $50K in working capital generates $75K additional revenue with 20% margins ($15K profit) and costs $5K in interest, your net benefit is $10K (20% ROI). Include indirect benefits like customer satisfaction, operational efficiency, and competitive advantages in your analysis.
Use working capital for debt consolidation only if it reduces your overall borrowing costs or improves cash flow. For example, paying off high-interest credit cards (18-25%) with a working capital loan (10-15%) saves money. However, avoid using working capital just to make debt payments without addressing underlying cash flow issues. Focus on investments that improve business performance first.
Restaurant franchises typically need 4-6 months of operating expenses in working capital due to high fixed costs, perishable inventory, and seasonal fluctuations. A restaurant with $40K monthly expenses needs $160K-$240K. Quick-service restaurants may need less (3-4 months) while full-service restaurants need more (6-8 months). Food costs, labor, and rent are the largest components.
Retail franchises face inventory management challenges, seasonal sales fluctuations, and customer payment timing issues. They need working capital for: seasonal inventory buildup, holiday preparations, new product launches, rent and utilities during slow periods, and staff scheduling flexibility. Fashion and seasonal retailers need 6-12 months of working capital while everyday retailers need 3-6 months.
Service franchises typically need less working capital (2-4 months expenses) because they have lower inventory requirements and more predictable cash flows. However, they need working capital for: payroll during client acquisition periods, equipment and supplies, insurance and bonding requirements, marketing and lead generation, and accounts receivable gaps if they invoice clients.
Fitness franchises have unique working capital needs: membership fluctuations (New Year rushes, summer slowdowns), equipment maintenance and replacement, seasonal program changes, instructor payroll during member fluctuations, and facility maintenance. They often benefit from lines of credit to handle membership seasonality and term loans for equipment upgrades that drive member retention.
Key risks include: over-leveraging and cash flow strain, high interest costs reducing profitability, personal guarantee exposure, dependency on debt for operations, and potential covenant violations. Mitigate risks by: maintaining conservative debt-to-income ratios, having multiple funding sources, building cash reserves, monitoring cash flow closely, and using debt strategically rather than for survival.
Build operational cash flow through: improving profit margins, accelerating collections, optimizing inventory turnover, negotiating better supplier terms, reducing unnecessary expenses, and building customer loyalty for predictable revenue. Use working capital loans strategically for growth and opportunities, not just to cover operating shortfalls. Build reserves during profitable periods.
Alternative options include: merchant cash advances (expensive but accessible), invoice factoring (for B2B franchises), equipment refinancing (if you own equipment), revenue-based financing, peer-to-peer lending, or franchisor financing programs. Focus on improving qualifications: building credit, increasing revenue, reducing expenses, and strengthening financial documentation for future applications.
Evaluate lenders on: industry experience with franchises, speed of funding, interest rates and fees, loan terms and flexibility, customer service quality, and ongoing relationship potential. Consider franchise-specific lenders, SBA preferred lenders, and community banks familiar with your market. Get multiple quotes and read reviews from other franchise owners before deciding.