Ways to fund your franchise: business loan options for UK franchisees

Common ways to fund a UK franchise include personal savings, a government-backed Start Up Loan, a bank's dedicated franchise lending scheme and a business loan once the business is trading. 

The right option depends heavily on whether you're buying your first franchise or growing an existing one.

Buying your first franchise vs growing an existing one

If you're buying your first franchise without an established trading history, a standard business loan may not be suitable. Options include the government-backed Start Up Loans scheme and dedicated franchise lending from some high-street banks.

The Start Up Loans scheme, delivered by British Business Bank, offers up to £25,000 per director, at a fixed rate and unsecured. It’s aimed at new business owners without a trading history. This is a government scheme rather than a Funding Circle product.

Several high-street banks also offer dedicated franchise lending schemes for accredited brands. These assess the franchisor's track record rather than the franchisee's own trading history, making them an option for first-time franchise buyers.

Funding Circle lends to established UK limited companies with a trading history. This includes businesses that already trade and want to add a franchise unit or refinance or expand an existing one. A first-time buyer starting a franchise from a standing start falls outside this profile.

What lenders look for in a franchise application

Lenders will want to understand the franchise opportunity and your ability to repay the loan. 

They may consider:

• The franchise agreement and disclosure documentation: These set out the terms of the franchise and give the lender information about the proposed arrangement.

• The franchisor's track record and financial forecasts: Lenders may consider the franchisor's experience and the performance of existing franchisees alongside forecasts for the proposed franchise. Actual trading figures from existing franchisees can provide stronger evidence than projections alone.

• A business plan and meaningful personal contribution: A business plan can show how you expect the franchise to perform and how you intend to use the finance. Lenders typically expect a franchisee to contribute towards the overall cost rather than borrowing the entire amount.

• A personal guarantee: Personal guarantees are common in unsecured franchise finance. If you're asked to provide one though, make sure you understand the personal liability involved and consider getting independent legal advice before signing anything.

Exact requirements will vary between lenders, so check what you'll need to provide before making an application.

Business loans for an established franchise business

Once a franchise business is trading, it can apply for finance based on its own trading history and financial position.

Funding Circle's business loans are available to eligible UK limited businesses with at least one year of trading history. Businesses can borrow from £10,000 to £750,000, with fixed-rate terms from six months to six years. A personal guarantee is required if your application is approved.

You can check your eligibility online without affecting your credit score. Applications can take around seven minutes, with decisions available in as little as one hour and funds typically paid within 48 hours of accepting an offer.

Funding equipment, vehicles and day-to-day costs

Many franchise sectors rely on specific equipment or vehicles, such as catering machinery, cleaning equipment and liveried vans. Asset finance can help spread the cost of these purchases to avoid having to pay the full amount upfront.

Funding Circle's asset finance Marketplace gives businesses access to deals from a panel of specialist lenders for vehicles, machinery and other asset types. Funding Circle acts as an intermediary in the Marketplace rather than providing the asset finance itself.

For day-to-day costs once a franchise is trading, such as stock or supplier invoices, Funding Circle’s FlexiPay provides a flexible line of credit.

Brokers and direct lenders

Some franchisees use a commercial finance broker to compare finance options from multiple lenders. This provides an alternative route for businesses that want to consider several providers rather than approaching a lender directly.

Funding Circle lends directly through its business loans, FlexiPay and Cashback business credit card whereas the asset finance Marketplace works in a similar way to a broker that provides lender options to compare. 

How Funding Circle can help

If your franchise business is already trading, Funding Circle offers business loans for established businesses. Asset finance can provide finance for vehicles or equipment, while FlexiPay can help with day-to-day costs.

Funding Circle's business loans are available to eligible UK limited companies with a trading history. You can check your eligibility online using a soft search that doesn't affect your credit score.

A personal guarantee is required if you're approved for a Funding Circle business loan. 

This is general information, not legal advice. Whether a personal guarantee is enforceable in your specific case depends on its own facts, so get independent legal advice on your own situation before assuming either way.

FAQs

Can you get a business loan to start a franchise?

If you're buying your first franchise without an established trading history, a standard business loan may not be suitable.  A Start Up Loan or bank franchise scheme may be more appropriate, while Funding Circle's lending is aimed at established businesses.

How much deposit do you need for a franchise?

There is no single deposit requirement. The amount varies by franchisor, sector, total investment and lender.

Lenders typically expect the franchisee to contribute towards the overall cost.

Do banks offer loans specifically for franchises?

Yes. Some high-street banks offer dedicated franchise lending schemes, including schemes accredited with specific franchise brands. 

These can take the franchisor's track record into account, making them an option for first-time franchise buyers.

Can I get a business loan for an existing franchise?

Yes. Once a franchise business is trading, it can apply for finance based on its own trading history and financial position, with options including business loans, asset finance or flexible credit.

Disclaimer

23/09/26 – While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.