Franchises are funded by combining your company's own cash with borrowing against the total set-up cost. A bank with a franchise desk may fund up to 70% of approved costs, so plan to put in 30% or more yourself, unborrowed. Which routes are open depends on whether your limited company is new, already trading, or buying an existing franchise.

Lenders fund the whole project, not the franchise fee. Barclays publishes franchise lending of up to 70% of approved costs – the licence fee, lease deposit, fit-out, equipment, and opening stock together – with up to £100,000 of that unsecured.

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Franchise finance combines your own cash with lending against the total cost

Most UK franchises are funded by putting in a chunk of your company's own money and borrowing the rest against the total cost of getting the unit open. A bank with a franchise desk may fund up to 70% of those approved costs, which leaves 30% or more for you to cover from cash you have not borrowed elsewhere.

That last condition catches people out. Lenders and franchisors both want to see that your share is genuinely yours, not raised on a second charge or an expensive short-term facility, because a company that has borrowed its own deposit has nothing left to absorb a slow first quarter. For a newer brand with a shorter track record, expect to put in more than 30%.

'Franchise finance' and 'franchise loan' describe the same thing from different angles: the mix of funding behind a franchise, and the lending part of that mix. We use franchise finance from here on.

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What a franchise costs, and what a lender will count

The total investment is the franchise fee plus everything else it takes to open and trade: the lease deposit, fit-out, equipment, opening stock, and enough working capital to cover the first months. Costs vary widely by brand, from a home-based service franchise to one with a high street lease.

Two numbers help you sanity-check a franchisor's figures. The average turnover per franchise unit in the UK is £400,000, and the sector contributed £19.1bn to the economy across 50,421 units. Both come from the 2024 National Franchise Survey on the British Franchise Association's site, the 32nd it has run, published in October 2024.

The same survey shows where the growth has gone, and where it hasn't. Personal services units grew 53% and hotel and catering 34% since the 2018 survey, while transport and vehicle services fell 34% and store retailing fell 25%. A lender looking at your sector will know which direction it has been moving.

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The routes that fund most UK franchises

Five routes cover most franchise funding in the UK. Which of them you can use depends on your company's stage, which the next three sections work through. The table below is the market as it stands on 13 October 2026, so treat the figures as a starting point for a conversation rather than an offer.

Four UK banks run their own franchise sections: Barclays, HSBC, Lloyds Bank, and NatWest. Several are affiliate members of the British Franchise Association, and a specialist franchise manager who already knows your brand will usually get further with a credit committee than a generalist business banker. Franchise finance brokers also arrange these routes for a fee, and some franchisors keep a panel bank you can start with.

The Growth Guarantee Scheme on GOV.UK sits behind some of this lending rather than alongside it. It gives an accredited lender a 70% government-backed guarantee on facilities generally up to £2m, which can tip a borderline application – but the guarantee protects the lender, and your company still owes the whole debt.

Timings vary by route. A bank's franchise desk typically works to weeks rather than days once your full pack is in, because a credit committee and legal work sit in the middle. Asset finance and non-bank lenders are faster.

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A Start Up Loan is a personal loan, not a loan to your company

A Start Up Loan can help fund a franchise, but it is a personal loan to you rather than lending to your company. GOV.UK is explicit: £500 to £25,000, unsecured, at a fixed 7.5% a year over one to five years. You stay personally liable whatever happens to the company.

Applying for a Start Up Loan on GOV.UK costs nothing, there's no early repayment fee, and successful applicants get up to 12 months of free mentoring. Directors often use one to close the gap between their own savings and what a bank will lend, then put the money into the company. Ask your accountant how to record that before you do it, because how it sits on the company's balance sheet affects what you can draw later.

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What lenders and franchisors check before they say yes

A lender assesses three things together: the franchise brand's record, your company's ability to repay, and you as a director. The franchisor runs its own check in parallel, and its main concern is that your cash is genuinely yours.

Between them, they will usually want to see:

• A business plan built on your own territory, not the franchisor's template
• Proof that your contribution is unborrowed
• Your own credit history as a director
• Relevant management experience, even from another sector
• The brand's unit economics and failure rate across its network

Accreditation does some of that work for you. A franchisor that belongs to the British Franchise Association has had its franchise agreement vetted against the association's code of ethics as part of membership, which gives a bank's franchise desk a known starting point. A brand with few UK units and no accreditation is a harder conversation, and some banks will decline it outright.

Three things affect what you can afford to repay, and it pays to model them before you borrow. The franchisor's ongoing fee comes off turnover regardless of how the month went, so it ranks ahead of your loan repayments. Buying through an approved supplier list can cost more than buying on the open market. And the franchise agreement has an end: an initial fixed term, with five years common and some agreements running to twenty, plus a right to renew that the agreement sets out. Borrowing over a longer term than your licence leaves you repaying a loan for a business you may no longer be able to trade.

Most commercial lenders also want a personal guarantee from at least one director. Borrowing through a limited company does not, on its own, keep the debt away from you.

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Where funding fits into buying a franchise

Funding comes after you have chosen a brand and met the franchisor, and before you sign anything binding. Get a lender's approval in principle before you pay a non-refundable deposit or sign the franchise agreement, because both commit your company whether or not the finance lands.

1. Research the brands on your shortlist, and talk to franchisees already running units.
2. Meet the franchisor, and use the meeting to judge them as much as they judge you.
3. Agree your funding in principle, with your total investment figure and your own contribution settled.
4. Sign the franchise agreement, having had a solicitor read it.
5. Open, with the franchisor's launch support behind you.

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A brand-new company has fewer routes, and usually not an iwoca one

A company incorporated to buy a franchise can borrow, but not from everyone. A bank's franchise desk will underwrite it against the brand's record and the directors' own finances, because there are no accounts to read yet.

That desk is the route built for this stage, alongside asset finance for the equipment and a Start Up Loan to close part of the gap. iwoca is usually not the right fit here, and it's worth saying so plainly. We lend against what a company's trading shows, so a company with no trading history gives us very little to read, and a brand-new company may face limits on what it can borrow. Come back once the unit has been open a few months and the picture changes completely.

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Funding a franchise you already run: fees and fit-out before the first takings

Running a franchise means paying out on someone else's timetable, so most franchise borrowing is a cash flow problem rather than a profit one. The lease, the refit, the opening stock, and the staff all come before the takings they produce, and the franchisor's fee comes off turnover regardless of how the month went.

A refit the brand has scheduled, or a stock order before a peak, can land in a month when there's nothing spare. A business loan with flexible repayment options is built for that gap. You borrow what the gap needs rather than a round number, repay as the takings land, and pay nothing extra for repaying early – interest runs on what you've drawn, for the days you use it, so a quick turnaround on stock costs less than a slow one. Muscle Squad, an ecommerce retailer rather than a franchise, describes the same rhythm a seasonal franchise unit will recognise: 'We go through waves of borrowing a significant amount and paying back a significant amount. You need the conviction that a good period is only around the corner.'

Borrowing is not the answer to every gap. If the shortfall is structural rather than a matter of timing – the unit's margins don't cover its costs – a loan moves the problem rather than fixing it, and that's a conversation to have with your accountant and your franchisor first.

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Buying an existing franchise business is assessed as a business purchase

Buying a franchise that is already trading is underwritten differently from opening a new unit. A lender can read filed accounts and real takings instead of projections, which some lenders treat as the lower risk of the two.

The franchisor still has to approve you as the incoming franchisee, so budget time for that alongside the funding, and check what the agreement says about transfers before you make an offer. The funding looks like a loan to buy a business more than a franchise start-up loan: the lender is lending against the unit's existing profits, and sellers will want to know your offer can actually be funded. manda, iwoca's mergers and acquisitions service, works with UK small businesses typically valued between £500k and £10m, and structures the acquisition finance as part of the deal. Buyers search for free.

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Frequently asked questions

Can you take out a business loan for a franchise?

A limited company can take out a business loan for a franchise, and lenders often treat an established franchise brand as lower risk than an untested independent start-up. What varies is how much: a bank's franchise desk will lend against the total project cost, while a non-bank lender will lend against what the company's trading shows.

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How do you finance a franchise with no money?

Funding a franchise with nothing is not realistic, because lenders and franchisors both want unborrowed cash from you. What you can do is reduce how much you need: pick a lower-investment home-based or van-based brand, use asset finance for the equipment instead of buying it outright, and use a Start Up Loan to close part of the remaining gap.

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Can I get franchise finance with a poor credit record?

A poor credit record makes franchise finance harder rather than impossible, and it's worth knowing what a lender sees before you apply. iwoca Credit Compass shows your Equifax business credit score plus four more scores, for free, along with the factors behind them and areas to improve. Fixing what's visible before you approach a franchise desk is usually time well spent.

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How long does a franchise agreement last, and does it limit my loan term?

A franchise agreement runs for an initial fixed term, with five years common and some agreements running to twenty, and a right to renew that the agreement sets out. It should shape your loan term: borrowing over a longer period than your licence leaves your company repaying a loan for a business it may no longer be able to trade.

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What happens to my loan if the franchisor goes out of business?

Your company's loan obligation does not disappear if the franchisor fails, and any director who gave a personal guarantee stays bound by it. Ask your solicitor to check what the franchise documents say about continuity and what happens to your rights if the franchisor's business changes hands, before you sign.