How franchises get funded

Few buyers pay for a franchise from savings alone. Most combine two or three sources. Financing is arranged in Evaluation, step three, but it pays to understand the routes before you pick a brand, because they shape what you can afford.

The common routes

• Savings and liquid assets. The simplest. Lenders and brands expect a portion of the investment to come from you whichever route you take.

• SBA-backed loans. Loans made by banks and guaranteed in part by the U.S. Small Business Administration. Franchises listed in the SBA's franchise directory can be easier to finance. Expect a business plan, a personal guarantee and a down payment.

• Retirement rollovers. Programs that let you invest retirement funds in your own business without an early withdrawal penalty, commonly called ROBS. They are legitimate and heavily regulated; set one up only through a provider who does them routinely.

• Equipment financing and leasing. For the parts of the investment that are equipment or vehicles.

• Home equity. A line of credit against your home. It's cheap money and it's your home. Decide with your eyes open.

• Franchisor financing. Some brands finance part of the fee or the equipment themselves. The FDD's Item 10 says whether this brand does.

What lenders look at

Your liquid capital and net worth, your credit history, your experience relevant to the business, and the brand's own record. A brand with a long history of financed openings is easier to fund than a new one.

Where partners come in

Your coach introduces you to funding partners we have worked with: people who arrange SBA loans, run rollover programs and know which lenders like which brands. The introduction costs you nothing, and using a partner is your choice. Your matches and your Match scores do not change based on who funds you.

When to start

Talk to a funding partner before Discovery Day. Brands expect financing in principle by then, and a lender's early view of your file often changes which brands you should be evaluating.