If you’re asking how to get funding for a franchise, start with a simple rule: financing should follow fit, not hype. The most practical approach is to match the franchise’s cash timing to a funding path you can qualify for and manage responsibly. In the video, the creator highlights two common routes buyers compare: SBA loans and 401(k) rollovers (often called ROBS).

This article is for informational and educational purposes only and is not legal, financial, or tax advice. Always consult qualified professionals and review the franchisor’s Franchise Disclosure Document (FDD) before making decisions.

Franchise funding works best when you use the FDD to map cash needs, verify requirements with lenders in writing, and treat rollover strategies as compliance-heavy structures that require professional review.

If you want to keep your original wording, just swap “The safest approach is…” to something less repetitive like “A disciplined approach is…” and add the “signing vs. pre-opening vs. early operations” line—that’s what improves flow the most.

Key Takeaways at a Glance.

Before you dive into specific franchise funding options, anchor yourself in a few fundamentals.

These takeaways summarize what the video emphasizes—especially the difference between lender-based funding (SBA) and retirement-based funding (401(k) rollover/ROBS). Use them as your quick checklist before you compare brands or talk to lenders.

• Start with the FDD: It’s the required disclosure document that frames real startup cost categories.
• SBA loans are lender-driven: Expect underwriting, documentation, and a cash injection requirement in many cases.
• 401(k) rollovers (ROBS) are complex: The IRS flags them as “questionable” and notes aggressive marketing by promoters.
• The SBA Franchise Directory helps process: Inclusion isn’t an endorsement or approval of the brand.
• Plan for “timing gaps”: Many costs hit before you open, and some hit right after opening.
• Veterans have additional resources: SBA programs and partners support veteran entrepreneurs, and some SBA Express fees may be reduced for eligible veteran-owned businesses.
• Use a checklist mindset: Funding should follow fit and due diligence—not the other way around.

If you keep these points in mind, you’ll avoid the most common funding mistakes—like choosing a franchise first and trying to “force” financing later. 

The next sections break down SBA loans and 401(k) rollovers in more detail, plus what to verify in the FDD and with qualified advisors. Think of this as the framework you’ll return to throughout your decision process.

What does “Franchise Funding” actually mean?

Franchise funding is your plan for paying the initial startup costs and early operating expenses using one or more capital sources—without assuming any specific outcome.

A common mistake is treating funding like a single yes/no decision: “Can I afford it?” A better question is: “Can I fund this responsibly, on time, with enough buffer to operate the model the way the franchisor requires?”

Your anchor document is the Franchise Disclosure Document (FDD). Under the FTC Franchise Rule, franchisors must provide a disclosure document that covers 23 required items, and you must receive it at least 14 calendar days before you sign a binding agreement or pay money.

If you want a deeper guide to the due diligence process—especially how to read the FDD without overwhelm—use the FBA education blog.

What should I look for first in the FDD when planning franchise startup funding?

Start with Item 7 to map cost categories and timing, then review owner-role requirements (Item 15) to avoid funding a model that doesn’t fit how you plan to operate.

A simple way to translate Item 7 into a funding plan is to sort costs into three timing buckets:

• At signing: franchise fee and required deposits (if any)
• Pre-opening: buildout, equipment, signage, technology setup, training travel
• Post-opening: initial marketing ramp, staffing ramp, working capital buffer

Once you’ve mapped the timing, you can evaluate funding paths more clearly—because you’re comparing financing to real cash needs, not guesses. This also helps you ask better questions of lenders, franchisors, and franchisees.

How does an SBA loan typically work for franchise funding?

An SBA loan is a bank loan that follows SBA program rules, where the lender underwrites the deal and the SBA provides a partial guaranty to the lender. In plain terms: you’re applying to a bank, and the SBA structure can make some deals possible that might not fit conventional lending.

In our FBA YouTube video, we describe SBA loans as a common funding route because they can cover a large share of eligible project costs. That’s a helpful starting point, but the practical takeaway is this: SBA lending is a process. You need to qualify through documentation and underwriting—not just a quick conversation.

What SBA loan requirements show up most often in franchise funding conversations?

The most common friction points are documentation, credit profile, and cash injection expectations—because lenders need proof you can support both the business and the loan structure.

The video mentions a credit score benchmark (roughly 680+) and a down payment range that can vary by situation. Treat those as context, not universal rules. Lenders differ, deal structures differ, and program guidance can change.

What tends to stay consistent is the overall shape of SBA underwriting:

• Borrower story: experience, management plan, and operating role.
• Personal financial strength: liquidity, obligations, and credit history.
• Project clarity: documented uses of funds tied to real quotes and estimates.
• Cash injection: borrower contribution expectations in many scenarios.

What does “equity injection” mean in SBA franchise funding?

Equity injection is your required contribution to the total project cost, and it usually must be verifiable and properly sourced.

SBA lending guidance (often referenced as SOP 50 10 for core programs) is essentially the playbook lenders use, and requirements can vary based on whether this is a startup, an ownership change (resale), or an expansion. Because the rules can be nuanced, one of the smartest moves is to ask early:

“What counts as equity injection in my specific scenario—and what does not?”

Then get the answer documented so you’re not building your plan on assumptions.

Does the SBA Franchise Directory matter?

Yes—the SBA Franchise Directory can simplify eligibility review for franchise agreements, but it is not an endorsement, approval, or prediction of success.

If a concept you’re evaluating appears in the directory, it may reduce friction around franchise-agreement eligibility checks. But you still need the fundamentals:

• A lender willing to finance your specific deal.
• A complete underwriting file.
• A franchise model that fits your plan (owner-operator vs. manager-led).

If you want help organizing options by owner role and operational model, you can start with the FBA franchise search and request guidance after you submit your preferences: FBA franchise search.

What should I ask a lender before I rely on SBA funding?

Ask questions that surface timelines, documentation burden, and deal-breakers early—so you don’t choose a franchise based on assumptions.

Here’s a practical lender question list:

• Eligibility: “Is this a startup, expansion, or ownership change in your view?”
• Injection: “What injection amount and source do you require?”
• Collateral/guarantees: “What personal guarantees are required?”
• Timing: “What are realistic milestones from application to funding?”
• Documentation: “What’s your checklist for a franchise deal?”
• Costs: “What fees should I expect, and when are they due?”
• Lease/buildout: “What do you need from the landlord and contractors?”

Once you understand a lender’s requirements and timeline, you can evaluate franchises more realistically. Instead of asking, “Can I get approved for this brand?” you’ll be asking, “Does this model match my role, my timeline, and the documentation burden I’m prepared to handle?

How does 401(k) franchise funding (ROBS) work, and why do people use it?

A 401(k) rollover approach—often marketed as ROBS (Rollovers as Business Start-Ups)—uses eligible retirement funds in a structured way to capitalize a new business instead of borrowing from a bank. It can be permitted, but it requires strict compliance with retirement plan rules and ongoing administration.

In our FBA YouTube video, we explain why this strategy gets attention: many people view retirement funds as “hands off,” but a rollover structure may make those funds available for a business under a specific setup. That’s a common framing—but it’s important to pair it with a reality check: regulators have cautioned that these arrangements can be highly technical, are sometimes aggressively marketed, and can create problems if the structure is mishandled.

What does the IRS say a ROBS arrangement is?

The IRS describes ROBS arrangements as a way prospective business owners use retirement funds to pay for new business startup costs, typically involving a plan that purchases stock in a new C corporation structure.

Because the structure touches retirement plan rules, it’s not a DIY project. You should assume there are setup steps, ongoing filings and administration, and governance responsibilities that continue after opening.

What are the biggest risks and red flags with ROBS/401(k) franchise funding?

The biggest risks are compliance failure, conflicts of interest, and underestimating ongoing plan obligations—any of which can create tax and legal consequences.

Use this checklist to stay grounded:

• Independent review: Has an ERISA-focused attorney reviewed the structure?
• Ongoing administration: Who handles filings, recordkeeping, and plan governance?
• Fees in writing: Are setup and ongoing costs clearly documented?
• Employee impact: How will plan eligibility work if you hire staff?
• Valuation: How will stock valuation be handled over time?
• Exit scenarios: What happens if you sell, close, or restructure the business?
• Marketing pressure: Are you being rushed with “simple” or “guaranteed” language?

If you’re weighing semi-absentee ownership, add one more question:

“Does this model require me to be an active operator in the early phase?”

That’s not just an operations question—it changes your oversight demands and the size of the buffer you may need during startup.

If you want help comparing franchise models that align with your desired involvement level (hands-on vs. manager-led), you can connect with an FBA broker.

A rollover strategy can sound straightforward in a short video clip, but in practice it’s closer to a compliance project than a quick funding hack. Treat it like a legal and tax structure first—and a funding source second.

What other franchise funding options should buyers understand in 2025?

Beyond SBA loans and 401(k) rollovers, many franchise buyers use a mix of conventional lending, equipment financing, partner capital, home equity, or seller financing (especially in resales) to match each cost to the right tool. The key is to think in terms of what the funding is for and when the cash is due, not just the total amount.

A practical way to compare options is to match the franchise model to its biggest cost drivers:

• Buildout-heavy concepts: Often require staged payments tied to construction milestones.
• Equipment-heavy concepts: May align with equipment financing tied to specific assets.
• Resale purchases: Sometimes include seller financing, depending on the seller and lender.
• Home-based/service models: Often have different cash timing than retail buildouts.

Common franchise funding options buyers use (high-level)

Here are several funding paths buyers commonly evaluate alongside (or instead of) SBA and ROBS:

• Conventional bank loans (non-SBA): Bank underwriting without SBA program rules.
  
• Equipment financing: Funding tied to eligible equipment purchases.
  
• Home equity: Can be flexible, but increases personal risk exposure.
  
• Partner capital: Adds shared control and governance complexity.
  
• Seller financing: More common in resales; terms vary widely by seller and deal.
  
• Franchisor lender introductions: Some franchisors share lender relationships, but it’s not a guarantee of approval.

Can you get funding for a franchise as a veteran?

Yes—veterans have dedicated SBA resources and partner networks that can help with planning, training, and connecting to support programs. A strong starting point is the SBA’s Veterans Business Outreach Centers (VBOC) program, which provides entrepreneurial support for veterans, service members, and military spouses.

It’s also worth knowing that SBA loan fees can change by fiscal year and may include exceptions for certain borrower categories. SBA publishes official fee notices for the 7(a) program, and those notices can outline specific exceptions or adjustments that may apply to eligible borrowers (including some veteran-related provisions depending on the period and loan type).

These options aren’t “better” or “worse” on their own—what matters is whether they match your concept’s cash timing, your documentation comfort level, and your intended owner role. Once you map those pieces, you can compare funding paths with far more clarity (and far less stress).

How should you compare franchise funding paths without relying on hype?

Compare franchise funding paths by stress-testing obligations, timing, and complexity—not by optimistic assumptions or marketing language. The goal isn’t to find a “best” option. It’s to choose the option you can qualify for, manage responsibly, and sustain alongside the real operational demands of the franchise.

A simple way to stay grounded is to run every funding path through the same three questions:

• Obligations: What ongoing payments, administration, or rules continue after funding closes?
  
• Timing: When does money need to hit (signing, buildout, opening, early months)?
  
• Complexity: How much documentation, compliance, and oversight does this add to your plate?
  

What are the practical trade-offs between SBA vs. 401(k) rollover?

SBA funding usually involves more third-party underwriting, documentation, and a repayment structure. A 401(k) rollover (ROBS) typically involves less lender underwriting, but more structural compliance and ongoing retirement-plan governance.

Here’s a clear side-by-side view you can use during due diligence:

SBA loan considerations.

• Underwriting cycles: Bank review, documentation, and approval milestones.
  
• Cash injection rules: Source verification and lender expectations.
  
• Repayment structure: Ongoing repayment obligation and lender requirements.
  
• Project approvals: Lease/buildout documentation (common in retail).

ROBS (401(k) rollover) considerations.

• Plan setup: Formal structure creation and ongoing administration.
  
• Compliance exposure: Higher risk if the structure is mishandled.
  
• Governance duties: Ongoing plan responsibilities after opening.
  
• Employee impact: Extra care with eligibility rules and plan operation.

If you feel pulled by “easy money” messaging, slow down and re-run the three-question test. The funding option that looks fastest on paper may be the one that adds the most friction after you open—either through repayment pressure or compliance workload.

What should you review in the FDD and discovery process before locking funding?

In short: Use the FDD to confirm required fees, your real owner role, territory terms, and key restrictions—because funding doesn’t fix a mismatch between the model and your day-to-day capacity.

A few reminders that keep buyers grounded during due diligence:

• The FDD is designed to give you material information to evaluate the opportunity and compare it to alternatives.
• You must receive the FDD at least 14 days before you sign a binding agreement or pay any money.
• The FDD cover page clearly notes that no government agency has verified the disclosures.

A funding-aligned FDD review checklist.

Use this checklist to connect “what I’m buying” to “what I have to fund”:

• Item 5–7: upfront fees + the initial investment table (your cash timing map).
• Item 6: ongoing fees and required payments (monthly/recurring obligations).
• Item 8: required suppliers (impacts flexibility, lead times, and purchasing rules).
• Item 12: territory terms and boundaries (where you can and can’t market/sell).
• Item 15: owner participation requirements (what “semi-absentee” really means).
• Item 19: only if provided (franchisors are not required to include it).
• Item 20–21: outlet counts and financial statements (system context and stability signals).

If you want a guided process for comparing brands on fit—without getting lost in spreadsheets—start with our education blog.

Once you’ve validated these items, you’ll have a clearer view of what costs are mandatory, what timing is realistic, and where you need written confirmation from lenders, landlords, or vendors. That’s when “funding” becomes a plan—not a guess.

FAQ: Franchise Funding Questions Buyers Ask Most.

These are the franchise funding questions we hear most often from buyers in the evaluation and due diligence stage. Use the answers as a quick reality check, then confirm details with your lender, your advisors, and the franchisor’s FDD.

Is franchise funding easier if I choose a “lower-cost” franchise?

Sometimes, but “lower-cost” doesn’t automatically mean “easier.” Funding fit depends on when costs come due, how much cash buffer the model needs early on, and whether the operating model matches your experience and availability. A lower initial investment can reduce the size of the financing package, but it can still be challenging if major costs hit before opening or if the model requires intense staffing and oversight from day one.

Can franchise funding cover more than the franchise fee?

Yes, depending on the funding source and deal structure, but you should map each cost category directly to Item 7 and confirm eligibility in writing. Many buyers underestimate how much of the initial investment sits outside the franchise fee, especially when there are equipment, technology, buildout, training travel, or pre-opening requirements. Treat the franchise fee as one line item in a broader timing plan rather than the full funding target.

What credit profile is needed for SBA franchise funding?

Requirements vary by lender and transaction type, but lenders typically want strong credit, consistent documentation, and a clear operating plan that fits the franchise’s staffing and oversight needs. Rather than anchoring on a single “minimum score,” it’s better to ask lenders what they weigh most heavily, how they view liquidity and cash injection expectations, and what documentation they require for your specific deal type.

How long does franchise startup funding take?

Timelines vary widely, and both lender underwriting and rollover structures can take time depending on documentation, deal complexity, and setup steps. The most common reason funding timelines become stressful is that buyers underestimate how many moving parts exist at once—franchise approvals, lender review, lease negotiations, vendor quotes, and the internal steps required to finalize paperwork. Build time buffers so financing doesn’t pressure your franchise decision.

Can you get funding for a franchise with a manager in place?

Possibly, but it depends on the franchisor’s owner-role rules and a lender’s view of management risk. You should confirm owner participation requirements in Item 15 and clarify how the brand expects the business to be launched and overseen, especially during the early phase when training, hiring, and quality control are most demanding. If your plan depends on a manager from day one, that should be validated in discovery and discussed explicitly with lenders.

If you notice yourself searching for the “right” funding answer, return to the basics: timing, obligations, and complexity. Funding should support a franchise model you can operate realistically—not push you into one that only works on paper.

Is franchise funding the right fit for you?

Franchise funding is often a fit for buyers who can document their capital sources, follow a structured due diligence process, and choose a franchise model that matches their intended owner role—hands-on, semi-absentee, or manager-led. The goal is not to “get funded at all costs,” but to fund a decision you can support operationally and financially under real-world conditions.

This path is often a better fit if you:

• Prefer structure: you’re comfortable with checklists, paperwork, and process discipline.
• Plan conservatively: you think in terms of cash timing, buffers, and contingencies.
• Accept trade-offs: you understand the difference between repayment obligations and compliance complexity.
• Commit to diligence: you’re willing to speak with franchisees, review the FDD carefully, and involve qualified advisors.
• Clarify your role: you know what you’ll do weekly—not just what you hope the business will look like eventually.

You may want to slow down if you:

• Use funding to compensate for unclear fit: the model doesn’t match your availability or skill set, but you’re hoping financing will solve that.
• Haven’t reviewed the full FDD early: you’re still operating on summaries, assumptions, or sales conversations.
• Feel rushed by urgency tactics: “limited time” claims are pushing you to move faster than your diligence process.
• Haven’t aligned with professionals: you haven’t reviewed your approach with qualified legal, tax, and financial professionals.

If you want help narrowing franchise options based on your capital readiness and desired involvement level, you can connect with an FBA broker.

Ready to take the next step? The Franchise Brokers Association is here to help guide you on your journey into the franchise world.