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How To Buy a Franchise With No Money and Bad Credit

April 11, 2022
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A lot of people love the thought of owning their own business. However, one of the biggest roadblocks is not having the money to get started or having bad credit that prevents them from being able to finance a franchise.

The good news is that even if you have no money or bad credit, you may still be able to get the funds you need to buy a franchise.

SBA Loan Written on Notepad, a Franchise Financing Option for Those With Bad Credit or No Money
If you have bankruptcies on your record or judgments and tax liens against you, then the odds of qualifying for a loan from a financial institution aren't the greatest.

But there's still hope if you just have a few blemishes on your report that have left you with a less than perfect credit score.

A bank will look at a few factors to determine your eligibility.

They'll look at how much capital you have to put down toward a franchise, how much collateral you have, your credit history, and they'll evaluate your experience with the type of franchise you want to buy.

These factors work together to help a lender determine whether or not they want to take a chance with you.

Different lenders work in slightly different ways. So even if you can't get a loan through one lender, another bank may be willing to take a chance on you.

Suppose you have bad credit but knowledge and experience in the industry of the franchise you want to purchase. Then you might be able to get financed by a lender who's willing to take the chance on you.

A Lender Willing To Take a Chance on a Couple Trying To Buy a Franchise
One thing to keep in mind is that lenders are often more willing to give you a loan for a franchise purchase simply because there are fewer risks than opening a new business.

That's because a franchise comes with a recognized brand, established customers, and a proven track record that makes them attractive to lenders, particularly if the borrower has experience in the industry.

If your credit isn't ideal, the best chance you have to get a franchise loan is through the Small Business Administration (SBA).

The government guarantees a percentage of SBA loans to borrowers, which decreases the lenders' chance of a loss. Most lenders generally prefer this arrangement, but even more so if someone doesn't have great credit or even no credit.

Keep in mind that before you can get an SBA loan, a bank needs to turn you down. Once a bank has turned you down, that bank or another one can submit your loan application to the SBA for consideration.

The SBA will look at a couple of things before they give you a loan.

First, your franchise of choice must be located in the U.S. It must be a "small" business, meaning less than $13.5 million in retail or service-related sales. They'll look at the financials and the marketing of the franchise you want to buy. You will also need to present a business plan for the SBA to examine.

The SBA will also look into many of the same things that a traditional lender would. But because of their loan guarantee, they won't be as stringent.

Franchise Owner Holding Sign Saying Small Business Loan Who Got Financing Through the Small Business Administration
If you have bad credit, your best bet is to go through one of the SBA's microloan options.

Let's say you absolutely can't get financing for a franchise. The worst-case scenario is you leverage your assets, find partners or investors, have someone co-sign, or apply for a grant (though this is very difficult).

You can also look for a smaller franchise that will finance the business opportunity cost for you. They'll let you pay it off with your other monthly royalty fees. However, not all franchisors will do this, but some will.


These franchises that are willing to help you get started are a good way to get into business with little or no money and bad credit. It can be a stepping stone to a bigger franchise investment down the road.

The bottom line is that you don't have to give up your dreams of owning a franchise. Even with minimal funds and bad credit, there are options available to you.

So start your dream-fulfilling search here.

Two Smiling Business Owners in Their Small Cafe Franchise That Will Finance Their Bigger Franchise Opportunity

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