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How to Buy a Franchise With No Money and Bad Credit

September 17, 2021
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A lot of people love the thought of owning their own business. One of the biggest roadblocks for many people, however, 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, even if you have no money or bad credit, you may still be able to get the money you need to buy a franchise.

The Words SBA Loan Written on a Notepad Next to a Calculator
If you have bankruptcies on your record or judgments and tax liens against you, the odds of qualifying for a loan from a financial institution aren't the greatest. However, if you just have a few blemishes on your report that have left you with a less than perfect credit score, then there's still hope.

A financial institution will look at a few factors to determine your eligibility, including how much cash, if any, you have to put toward buying a franchise, how much collateral you have, your credit history, and what kind of experience you have with the type of franchise you want to buy. All of 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 lender may be willing to take a chance on you. Someone with less than perfect credit, but who has experience in the industry they want to buy a franchise in, might be able to get financed by a lender willing to give higher-risk loans to them.

A Lender Willing To Take a Chance on a Couple Trying To Buy a Franchise
Something else to keep in mind when you want to buy a franchise is that lenders are often more willing to give a loan on a franchise purchase simply because the risk is far less than the risk of 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 is less than perfect, the best chance you have to get a franchise loan is through the Small Business Administration (SBA). That's because the government guarantees a percentage of SBA loans, which decreases the lenders' chance for a loss. Most lenders prefer this type of arrangement in general, but particularly in the case of someone who doesn't have great credit or someone who even has no credit. Keep in mind that before you can get an SBA loan, a bank needs to turn you down. Once you've been turned down by a bank, that bank or another one can submit your loan application to the SBA for consideration.

The SBA will look at a couple of things. First, your franchise of choice must be located in the U.S., and it must be a "small" business, meaning less than $13.5 million in retail or service-related sales. The SBA will also 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 the guarantee, they won't be as stringent as a traditional lender.

A Franchise Owner Who Got a Franchise Loan Through the SBA
If you have bad credit, your best bet is to go through one of the SBA's microloan options. If you absolutely can't get financing, the worst-case scenario is leveraging your assets, finding partners or investors, finding someone to co-sign, or even trying for a grant (though this is very difficult). You can also look for a smaller franchise that will finance the cost of the franchise for you, letting you pay it off with your other monthly fees. Not all franchises will do this, but some will.


These types of franchises are a good way to get into business with little or no money and bad credit and can be a stepping stone to a bigger franchise down the road. The bottom line is, you don't have to give up your dream of owning a franchise if you have a desire to get one. Even with minimal funds and bad credit, there are options available.

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

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