Guide to Franchise Financing

smiling female franchise owner handing a bag to a customer, guide to franchise financing

Estimated reading time: 5 minutes

If you are a franchise business owner, you benefit from an established brand, proven business model, marketing efforts, and ongoing operational support provided by your franchisor. This, along with the exceptional customer service your franchise provides, can help pave the way to growth and success.

However, there might be times when you need to obtain business funding, such as an unexpectedly slow sales period or an economic downturn. You might also need an influx of capital to cover day-to-day operational costs or financing to pay for a franchise remodel or brand mandate. If you own a hotel franchise, you may need to fund a property improvement plan (PIP). Access to funding is essential to keep your franchise moving in the right direction, and you have several options to consider. This Balboa Capital features an overview of franchise financing.

What is franchise financing?

Franchise financing, as the name implies, is a type of financing geared toward single-unit and multi-unit franchise owners. It encompasses short-term working capital loans and financing for furniture, fixtures, and equipment (FF&E), store remodels, brand mandates, and property improvement plans (PIPs).

Understanding the loan and financing options available, as well as the borrowing requirements, interest rates, and repayment terms for each, is essential. Therefore, it is recommended that you research and evaluate the various franchise financing products to determine the best option for your needs and financial situation.

Franchise working capital loans.

Franchise working capital loans are short-term loans designed to help you cover the cost of your daily operational expenses. These loans provide quick access to funds that can be used for inventory and supplies, employee payroll, rent, utilities, business insurance, franchise business taxes, and more. You can also use a franchise working capital loan to bridge short-term gaps in revenue.

This type of loan offers two key benefits. First, the application process is straightforward and involves less time and paperwork than a traditional business loan application. Second, franchise working capital loans have shorter repayment schedules, which means the loan can be paid off sooner rather than later, reducing your debt.

Furniture, fixture, and equipment (FF&E) financing.

No matter what type of franchise you own, it uses certain kinds of furniture, fixtures, and equipment (FF&E) that meet the quality, safety, design, and brand standards your franchisor sets. Elements such as tables, chairs, display cabinets, appliances, signage, lighting, and point-of-sale (POS) systems add functionality and aesthetics to your franchise’s space.

The cost of furniture, fixtures, and equipment can add up fast. That’s where financing can help, especially if you lack capital or want to avoid using up a large portion of your savings. With FF&E financing, you receive funding to finance furniture, fixtures, and equipment, and you repay what you borrow, plus interest and any applicable fees, over a set period.

Franchise remodeling financing.

It is common for franchisors to have their franchisees invest in remodeling initiatives at specific intervals. Remodeling can help a franchise attract more customers, improve brand perception, enhance the overall customer experience, and stay competitive in the market. Suppose your parent company recommends that you remodel your establishment for a new or updated look. In that case, you will need funds to pay the contractors and suppliers who oversee and handle your remodeling needs.

Franchise remodeling financing can help ease any cash flow concerns you may have. With this option, you receive funding for the total cost of your remodeling efforts and make predictable payments that include interest and applicable fees over a convenient term.

Franchise brand mandate financing.

Franchise brand mandates and guidelines are essential to ensuring uniformity and a consistent customer experience across all franchise locations, including yours. The brand mandate’s size, scope, and timeline will vary based on the franchisor. For example, a quick service restaurant (QSR) franchise might ask its franchisees to invest in a new ice maker, which doesn’t require a sizeable investment. Conversely, some brand mandates, such as new kitchen equipment or a lighting retrofit, are more involved and require more capital.

If you are required to invest in a brand mandate, your franchisor will provide you with the type(s) of equipment, technology, etc., that are required, along with vendors they recommend. As you know, you must acquire the equipment and technology that fall under the brand umbrella; nothing else is allowed. Franchise brand mandate financing is a convenient option worth looking into. It is similar to franchise remodeling financing in that you receive the funds upfront, and you repay the total amount, plus interest or applicable fees, over a convenient time frame.

Property improvement plan (PIP) financing.

If you are a hotel franchise owner, it can be challenging to implement a property improvement plan (PIP) to renovate your property. One common obstacle is the financial burden of meeting the required upgrades and renovations within a specified timeline. This can strain your budget and cash flow, making it difficult to fund necessary improvements. The good news is that you can finance your hotel’s PIP.

Property improvement plan (PIP) financing is popular among hotel franchisees due to its easy application process and prompt turnaround time. PIP financing works like the other financing products in this blog article. You borrow funds to pay for your PIP and repay what you borrow, plus interest and applicable fees, with easy monthly payments over a set period.


Balboa Capital is a top-rated business lender that offers franchise working capital loans and financing solutions to franchisees across the United States. Over the years, we have structured and delivered fast, dependable funding to franchisees in many industries, including QSR and hospitality. We welcome the opportunity to serve you.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.