How to Finance Buying a Franchise in Australia
Business Owners
Franchise loans · Franchise finance · Buying a franchise in Australia
A franchise purchase is not one loan. It is a sequence of deposits, facilities, lease obligations, approvals and working capital needs that starts before you sign and continues after you open. This guide covers what lenders fund, what they secure, what to check before you pay, what can still move after approval, how accreditation changes the file, and what happens when you expand, refinance, sell or exit.
Quick Answer
A franchise purchase in Australia is usually funded with a mix of your own contribution, business lending, equipment finance and sometimes property-backed finance. Lenders assess five things together: you, the franchise system, the site and lease, the remaining agreement term, and the security. The cash you need is often driven as much by payment timing and valuation gaps as by the headline purchase price.
Also called: franchise loan, loan to buy a franchise, franchise finance, franchise business loans.
Start where you actually are
Most people reach this page partway through a process that has already started somewhere else. Pick the line that matches you.
- Still looking at brands, nothing paid. This is the earliest point to test financeability. Establish whether the brands on your shortlist sit on a lender panel before you narrow further: does the brand affect approval.
- You want a finance answer before choosing a site or signing a lease. You can usually test the borrower, contribution, security and brand before the final site is locked, but final approval still depends on the site, lease and transaction documents. See what franchise pre-approval can and cannot tell you.
- You have been asked to pay to hold a territory. An early deposit can put your cash at risk before the key documents and finance position are settled. The ACCC warns that a payment made before key documents may not be refundable. Read what order the money moves in before you pay anything.
- The disclosure documents have arrived. You are inside a legally protected fourteen day window. It is the window to get a finance answer in: the Code timetable against the finance timetable.
- Buying an existing site, contract signed. Two clocks are now running, yours and the franchisor's consent process. See new franchise or resale.
- Already committed and the numbers moved. Usually the fit out came in over the valuation or the contribution has grown. Start at what a lender can actually secure.
- You already run one site and want another. A different and usually easier assessment: buying a second or third site.
- Already trading and it is not working. The loan does not stop when the business does. Start at what happens to the loan if the franchise does not work out.
What this guide covers
- How do franchise loans work in Australia?
- What order does the money move in when you buy a franchise?
- How does the Franchising Code timetable line up with your finance?
- How much do you need to put in when you buy a franchise?
- What is franchise accreditation, and what if your brand is not accredited?
- What security does a lender take on a franchise loan?
- Which franchises are easiest to finance in Australia?
- Should you use the franchisor's recommended finance panel?
- How long can you borrow for on a franchise loan?
- Should you buy a new franchise or an existing one?
- What does a franchise cost beyond the franchise fee?
- Why do franchise loans get declined?
- What happens to your loan if the franchise ends or the franchisor collapses?
- Frequently asked questions about franchise loans
How do franchise loans work in Australia?
A franchise purchase in Australia is usually funded as several facilities, and the lender assesses the borrower, the franchise system, the agreement term and the security together. Lenders fund a franchise purchase in parts, each matched to a different thing you are buying, because the parts of a franchise carry very different risk and very different security. The franchise fee buys a licence. The fit out buys leasehold improvements. The equipment buys assets a lender can identify. The stock and the opening float buy working capital. One application, several facilities, assessed together.
That structure is the first thing to understand, because it explains why the question people usually ask, what interest rate do franchise loans have, is answered further down this section rather than at the top. What you are funding decides which facilities are available to you, and that decides both the shape and the pricing of the deal. Business lending sits behind the core of the purchase, with equipment funded separately and premises funded separately again if you buy them.
The second thing to understand is that a lender is not only assessing you. It is assessing an agreement you did not write and cannot change. Under the Franchising Code of Conduct, franchise agreements entered into, renewed or extended on or after 1 November 2025 must give the franchisee a reasonable opportunity to make a return, during the term of the agreement, on any investment the franchisor requires (ACCC, The franchise agreement, read 17 September 2026; the obligation sits at section 44 of the Franchising Code regulations on the Federal Register of Legislation (F2024L01605)). The regulator is describing the exact economics the credit team underwrites. A reasonable opportunity is not a guarantee of profit, and no lender treats it as one, but it tells you what the agreement is supposed to deliver and therefore what the file has to show.
| What you are funding | What it usually is | Typical funding source | What secures it |
|---|---|---|---|
| The initial franchise fee | A one off payment for the right to use the brand, the system and the territory for the term | Business lending, or the buyer's own contribution | Usually nothing tangible. Commonly a director guarantee, sometimes property |
| Fit out to franchisor specification | Building work, joinery, signage and services installed in premises you generally do not own | Business lending, occasionally an equipment facility on the identifiable plant | Leasehold improvements are weak security. Often supported by other assets |
| Franchisor specified equipment | Named machines, point of sale, refrigeration, vehicles | Equipment finance against each identifiable asset | The equipment itself, registered against the asset |
| Initial stock | The opening order the system requires before you trade | Working capital, or a facility drawn at handover | Typically a general security interest over the business |
| Training and opening costs | Induction, launch marketing, uniforms, licences and pre opening wages | Working capital, frequently the buyer's own funds | Rarely secured in its own right |
| Working capital to first target trading | The cash the site burns before it reaches the volumes the model assumes | An overdraft or a term facility sized at approval | General security, supported by guarantees |
| The premises, if you buy them | Freehold rather than a lease, which is a separate purchase | Commercial property lending, assessed on its own | A registered mortgage over the property |
Read that table as a map of where the finance conversation actually happens. Most buyers arrive asking about the fee, and the fee is usually the smallest and the least fundable part. Business loan terms, structures and assessment differ facility by facility, and the general mechanics of buying a business, asset versus share purchase, goodwill, vendor terms and the rest, sit in the parent guide on buying a business more generally. This page stays on what is specific to franchising. For the non finance side of the decision, the government's own overview of buying a franchise is a reasonable starting point.
How is a franchise loan different from a normal business loan?
A franchise loan is an ordinary business loan with two extra things being assessed: a contract you did not write, and a brand the lender may already hold a view on. There is no separate regulated product called a franchise loan. The facilities are the same facilities any business buyer uses. What changes is the assessment.
- A third party can end the business. The franchise agreement sits between you and the trading right, so the remaining agreement term caps the loan term in a way an independent business purchase does not.
- The brand carries its own credit position. A lender may already have assessed the system, which can speed the file up or rule it out before your own numbers are read.
- The goodwill mostly is not yours. On an independent business the goodwill attaches to the business. On a franchise it largely attaches to the network, which is why there is less to secure than the purchase price suggests.
- A statutory timetable runs alongside the credit timetable. The Franchising Code sets deadlines an independent purchase simply does not have, and the finance has to fit inside them.
- The spend is prescribed. Fit out and equipment are specified by the franchisor, so you cannot value engineer a shortfall away the way an independent operator can.
Everything else, servicing, credit conduct, ABN history, entity structure, is read the way any business loan is read.
What interest rate do franchise loans have in Australia?
There is no single franchise loan rate, because a franchise purchase is priced facility by facility rather than as one product. Each facility is priced against what sits behind it. Equipment finance is priced against an identifiable asset the lender can recover. A property secured facility is priced against the property. The portion with the least behind it, which is usually the franchise fee and the fit out, prices highest, because that is where the lender is carrying the most risk with the least security.
That is why two buyers on the same brand, quoted in the same week, can be given very different numbers. The difference is usually the mix of facilities and the security behind each one, not the brand and not the buyer's negotiating. It also means the lowest headline number is not automatically the cheapest outcome: a structure that pushes everything onto one property secured facility can look cheaper and quietly use up the security you need later.
The useful questions to ask a lender or broker are therefore which facilities the structure uses, what secures each one, and what the whole package costs together, rather than what the rate is. Pricing varies by lender, by security and by your circumstances at the time of application.
What documents do you need for a franchise loan in Australia?
A complete franchise finance file usually combines borrower evidence, the franchise documents, site and fit-out material, and a cash-flow case. Exact requests vary by lender and transaction, but the assessment is cleaner when those groups arrive together rather than one piece at a time.
- You and the borrowing entity. Personal and business tax information where available, assets and liabilities, existing debts, credit conduct, contribution evidence, ownership structure and details of relevant management or industry experience.
- The business case. A business plan where the lender asks for one, cash-flow forecasts, a working-capital budget and the assumptions behind the opening ramp-up.
- The franchise pack. The information statement, disclosure document, franchise agreement, franchisor approval or transfer requirements, and any related agreements that affect the business or security.
- The site and build. Lease or occupancy documents, fit-out quote, equipment schedule and quotes, landlord incentive or contribution details, builder information and the dates deposits or progress claims fall due.
- For an existing franchise. The business sale contract plus the financial statements, BAS, bank conduct and other trading evidence the lender requests for the site being acquired.
Lenders that publish their own business finance document lists ask for broadly the same core set: annual financial statements, tax information, BAS, cash-flow projections, interim management figures, the business contract of sale, lease agreements, personal tax and an assets and liabilities position, and for a new or materially changed business, a business plan. Franchise lenders then layer the franchise-specific documents above on top of that, which is why a franchise file is heavier than a standard business purchase file even when the numbers are smaller.
Can you get franchise finance pre-approval before choosing a site?
You can usually get an indicative or conditional view on the borrower, contribution, security and franchise brand before the final site is locked, but you cannot treat that as final approval of the transaction. The site, lease or occupancy documents, fit-out cost, equipment list, agreement term and final cash requirement can all change the lender's answer.
That early view is still useful because it tells you whether the broad structure is realistic before you spend money on a territory, lease negotiation or detailed due diligence. Ask exactly what the lender has assessed, what remains outstanding, whether a valuation is still required, and whether the process involves a formal credit application. If you are comparing options, scope policy and structure first and keep formal applications deliberate; multiple credit enquiries in a short period can complicate the next assessment.
Which kind of franchise finance are you looking for?
The phrase franchise loan covers at least four different transactions, and only one of them is this guide. People arrive here having searched the same words for very different reasons, and the answers diverge immediately, so it is worth being clear which one you are before you read further.
| What people call it | What it actually is | Is it covered here? |
|---|---|---|
| Franchise loan, franchise finance | A franchisee borrowing to buy and open one franchised site, new or as a resale | Yes. This is the whole guide |
| Multi site or master franchise finance | A franchisee funding a second, third or subsequent site, or acquiring development rights across a region | Partly. The second site assessment is covered below; master and development rights are a different structure |
| Franchisor or network funding | The brand owner raising capital to expand the network, build company owned sites or fund a specific purpose fund | No. That is corporate and commercial funding, assessed on the franchisor's own balance sheet |
| Motor dealership franchise agreement | A vehicle dealership operating under a manufacturer's franchise agreement, with floor plan and wholesale funding | No. Dealership funding runs on entirely separate machinery |
| Financing offered by the franchisor | The franchisor itself deferring or lending part of the fee or fit out cost, rather than an outside lender | Partly. It behaves like vendor finance and affects what an outside lender will approve |
What order does the money move in when you buy a franchise?
Pay the franchise fee only once finance is unconditional, or on terms that protect you if it is not, because the fee usually falls due before any facility can draw. Conditional approval is not unconditional approval, and money paid before every lender condition is met can be exposed if the finance then fails. Where the franchisor will agree, ask for the fee and any deposit to be timed to, or conditional on, unconditional finance, and get your solicitor to check the agreement before you pay. The Code's cooling-off right applies to the franchise agreement, not to the loan, as the Franchising Code section below explains.
The earliest payments in a franchise purchase are the ones least likely to be funded, and they fall due before any facility can draw. This is the single most useful thing to understand before you start, and it is often not explained clearly. Buyers plan a total number and a total facility, then discover that the sequence does not line up: the money going out starts weeks or months before the money coming in is available, and the parts that go out first are the fee, the bond and the deposits, which are exactly the parts a lender can least easily secure.
The order below is the shape of a typical new site. A resale compresses several of these into settlement, which is one reason a resale can be a cleaner funding exercise. Read it as a cashflow, not as a budget.
| Stage | What you pay | Can a facility fund it at that point? |
|---|---|---|
| Before disclosure | A deposit or expression of interest payment to hold a territory or site | Usually not. Nothing is approved and often nothing is documented. Assume this is your own cash. The ACCC cautions that a deposit paid before key documents may not be refundable, and paying before signing does not itself start the later cooling-off period |
| On or shortly before signing | The balance of the initial franchise fee | Sometimes, where an approval is in place and a term facility is structured to draw at signing. Frequently funded by the buyer because there is nothing to secure against |
| At lease or occupancy signing | The bond or bank guarantee to the landlord, plus any lease legal costs | Rarely. A bank guarantee is a separate line and usually needs cash or property behind it. Budget it separately from the loan |
| Fit out, progressive | Builder deposit, then progress claims through the build | Progressively, against invoices, and against the valuation rather than the invoice total. The deposit is usually the hardest claim to fund |
| Equipment order and delivery | Supplier deposits on order, balance on delivery | On delivery, not on order. Equipment finance typically settles against the invoice once the asset arrives, so the supplier deposit often sits with you in the meantime |
| Before you open | Opening stock, training, uniforms, licences, launch marketing and pre opening wages | Yes, once the working capital facility is settled and the account is operating. Timing this against handover matters more than the amount |
| From first trading | Royalties, specific purpose fund contributions, rent, wages and the first loan repayments | This is what the working capital sizing was for. Repayments usually begin before the site reaches the volumes the model assumes |
Indicative practitioner sequence only, as at 17 September 2026. Exact payment dates, draw conditions and what a lender will fund depend on the franchise documents, supplier contracts, lender terms and transaction structure. The ACCC warning on early deposits is a regulatory point; the funding sequence is not a lender policy table.
Two consequences follow, and both are worth acting on rather than reading past. The first is that your own cash is needed earliest and the borrowed money arrives latest, so a contribution that is technically adequate can still be badly timed. The second is that the payments made before disclosure and before signing are the ones you can least easily recover if the finance answer comes back differently from what you assumed, which is the practical reason for getting a conditional answer inside the Code's waiting period rather than after it.
Can you get franchise finance before the lease is signed?
Often you can get a conditional credit answer while the lease or occupancy documents are still being finalised, but the lender may keep the final lease, landlord consent or related documents as conditions before settlement or drawdown. That means a finance approval can exist while the money is still not ready to use.
The practical risk is sequencing. A landlord, franchisor, builder or equipment supplier may want a signature or deposit before the lender is draw-ready. Put the lease execution date, builder deposit, equipment deposit, franchise fee and finance conditions on one timeline before you commit. If one party needs money before the lender can release it, that timing gap belongs in your contribution and working-capital plan rather than being discovered after signing.
What can still go wrong after finance is approved but before the franchise opens?
A conditional approval does not freeze the transaction. The lease, franchisor consent, fit-out valuation, builder and equipment deposits, landlord contribution, final lender conditions and opening cash runway can all move after the credit answer has been issued. The practical job is to keep those workstreams running beside each other rather than assume approval means the money is ready to use.
| What moves | What can happen | Finance consequence |
|---|---|---|
| Lease or occupancy documents | Execution, landlord consent or final lease terms run later than expected | A lender condition stays outstanding and settlement or a draw can move with it |
| Landlord contribution or incentive | The reimbursement is paid after works or after evidence is supplied rather than when the builder wants payment | The franchisee needs a temporary cash bridge inside the opening budget rather than treating the incentive as day-one cash |
| Fit-out valuation | The completed works are attributed less value than the builder's invoice or franchisor specification | The buyer contribution increases unless another approved security or facility covers the gap |
| Builder and supplier deposits | Deposits are due before the lender's milestone or equipment-delivery trigger | Cash leaves before asset or fit-out finance can draw |
| Franchisor approval or transfer consent | The franchisor asks for more information or the approval process runs beside the lender's own conditions | The contract, consent and finance clocks can stop lining up |
| Opening date and working capital | Fit out, approvals or equipment delivery push revenue back while rent, wages and repayments get closer | A facility that funded the build can still leave the business undercapitalised on opening day |
For the lease-to-opening cash gap specifically, see the bridge costs between signing a commercial lease and opening. The principle is the same on a franchise: fund the dates, not just the total. The fit out guide sets out how fit out finance is structured on its own.
What is the difference between conditional approval and being ready to settle?
Conditional approval means the lender is prepared to proceed if its stated conditions are satisfied; it does not mean the money is ready to draw. Lender labels differ, so the useful question is not only whether you are approved, but which conditions remain outstanding, who controls them and what date each can realistically be satisfied.
- Initial credit view. The lender or broker has enough information to say the deal may fit policy, but valuations, final documents or detailed verification can still change the answer.
- Conditional approval. Credit has agreed subject to named items such as valuation, lease or franchise documents, security, contribution evidence, insurance, entity requirements or final financial information.
- Loan and security documents. The facility has to be documented and signed correctly, and any mortgages, guarantees or asset-security steps have to be ready.
- Ready to settle or draw. The lender's conditions have been satisfied and the legal, franchisor, lease, settlement and payment mechanics line up on the same date.
A franchise file can therefore be approved in credit and still miss settlement because the lease is unsigned, the fit-out valuation moved, the franchisor consent is outstanding, the buyer contribution changed or a supplier payment falls before the facility's draw trigger.
How does the Franchising Code timetable line up with your finance?
The Franchising Code sets its own clock, with the information statement first, the key documents at least 14 days before you sign and a 14-day cooling-off period after, while a lender's approval clock runs separately, so the two have to be lined up before anything binding is signed. A new Franchising Code of Conduct took effect on 1 April 2025, with additional rules applying from 1 November 2025. The Code applies to franchise agreements entered into, transferred, renewed or extended from 1 April 2025 (ACCC, About the Franchising Code and when it applies, read 17 September 2026).
For a prospective franchisee, the core finance window is the disclosure period. The franchisor must give the information statement within 7 days after interest is expressed and before other documents. The franchise agreement, disclosure document and a copy of the Code must then be provided before entry, and after the required documents are received in final form there is a mandatory 14-day waiting period in which the agreement cannot be entered into (ACCC, Information and document obligations, read 17 September 2026).
| Code step | Deadline | What it means for the loan |
|---|---|---|
| Information statement | Within 7 days after interest is expressed, and before any other document | Check the brand's lender position and the likely security and contribution before paying for detailed credit work or narrowing to a site |
| Franchise agreement, disclosure document and a copy of the Code | At least 14 days before the agreement is entered into, with a mandatory 14-day waiting period once the documents are received in final form | Send the same pack to the broker and your advisers and get a real credit view inside the period. It is a decision window, not a guaranteed lender turnaround |
| Cooling-off period | Within 14 days of entering into a new franchise agreement. Money paid must be returned within 14 days of notice, less reasonable expenses relating to the termination where the agreement provides for them. Limited opt-out rules apply from 1 November 2025 | Cooling off applies to the franchise agreement, not to the loan. Treat any approval as conditional until every lender condition, lease and settlement item is satisfied |
| Transfer consent | Consent can be assumed if the franchisor has not refused in writing within 42 days after the later of the transfer request or receipt of the last information it asked for | Start the consent request and the information list early and run them beside the lender's conditions, because consent to a transfer is not finance approval |
| End of term notice | At least 6 months before the agreement ends, or at least one month if the term is under 6 months | Whether the agreement is extended can decide whether an existing facility can be refinanced or extended |
Sources for the rows above, all read 17 September 2026. Information statement, documents and the waiting period: ACCC, Information and document obligations. Cooling off: ACCC, Ending a franchise agreement. Transfer consent: ACCC, Selling or transferring a franchise agreement. End of term notice: ACCC, Extending or renewing a franchise agreement. The Franchising Code of Conduct sits in regulations registered on the Federal Register of Legislation as F2024L01605; the current compilation is F2025C01029, compilation date 21 October 2025, checked 17 September 2026. This table summarises ACCC guidance and is general information, not legal advice.
Two further points from the ACCC's own guidance on the changes matter if you are buying into an older agreement. There was a transition period from 1 April to 31 October 2025 in which agreements had to allow a reasonable opportunity to earn a return on investment and provide for compensation for early termination, with all requirements of the new code applying from 1 November 2025. And agreements entered into, transferred, renewed or extended before 1 April 2025 do not have to be updated to comply, but an existing agreement that is transferred, renewed or extended on or after that date must comply. On a resale that is the difference between inheriting an old agreement and triggering a new one (ACCC, Guidance on changes to the franchising code, page updated 25 August 2026, read 18 September 2026).
From 1 April 2025 the code also prohibits a restraint of trade clause that applies where the agreement expires and the franchisee has sought to extend or renew, with civil penalties for franchisors who enter agreements containing one (same ACCC guidance, read 18 September 2026). That is an exit provision rather than a finance provision, but it changes what you can do after the term ends, which is part of what a lender is pricing when it sets the term.
The practical use of the timetable is to keep the finance work inside it. Start the credit view when the disclosure pack arrives, run franchisor consent and lender conditions together rather than one after the other, and treat any approval as conditional until every condition, lease and settlement item is actually satisfied. The wider purchase timetable for any business acquisition sits underneath this one.
Can buying an existing franchise be made subject to finance?
A business sale contract can include a finance condition, but it only protects you to the extent the actual clause does and only if you comply with its dates, loan amount, notice and evidence requirements. Do not treat the words subject to finance as a general right to walk away. The sale contract, franchise agreement, lease and lender approval are separate documents, and a protection in one does not automatically undo the others.
This is also why conditional approval is not the same thing as satisfying a finance condition. A lender can still be waiting on valuation, lease documents, franchisor consent, security, contribution evidence or final financial information. If the contract requires final approval by a particular date and the approval is still conditional, is for less than the amount required, or a valuation creates a shortfall, your solicitor needs to know before the finance-condition deadline expires.
The Legal Practitioners' Liability Committee warns that finance clauses can be lost through missed notice dates, insufficient approval or confusing a conditional approval with a final one, and it cites a Victorian business-sale case where the timing of the finance notice was central to whether the contract was ended (LPLC, Subject to finance requires strict compliance, page dated 10 August 2026, read 18 September 2026). Contract wording and state law vary, so have the sale contract and any lease condition checked by your solicitor before you rely on them.
Which parts of the disclosure document does a lender read?
A lender reads the disclosure document for the setup and ongoing costs, any required capital expenditure, whether earnings information is supplied, the current and former franchisee information, the franchisor's solvency position, supply restrictions and the other agreements you may have to sign. Those are the parts that shape cash flow, security and timing, which is why the document is worth reading as a lender file and not only as a legal one.
The ACCC says the disclosure document must include information about setup and running costs, current and former franchisees, the franchisor's solvency, future capital expenditure and supply arrangements. If earnings information is supplied, it must be included in or attached to the disclosure document; if it is not supplied, that must also be stated. Prospective franchisees should use the document to make an informed decision and obtain independent advice (ACCC, Franchise disclosure document, read 17 September 2026).
| What to pull out | Why a buyer cares | Why a lender cares |
|---|---|---|
| Total setup and ongoing costs | Shows the real cash requirement beyond the headline franchise fee | Sets the amount, facility mix and working capital requirement |
| Significant capital expenditure | Shows refits or other required spending that may land during the term | Tests whether the debt can amortise before another major funding event arrives |
| Earnings information, or the statement that none is supplied | Shows whether there is system or site earnings material to test | Determines what can support a forecast for a new site. It is evidence to assess, not a guarantee |
| Current and former franchisee contacts | Lets you test the sales story against operators who are living it or have left | Helps surface churn, transfers and operational questions before credit assessment |
| Solvency, legal action and materially relevant facts | Shows risks that sit above the individual site | Changes how much weight can safely be put on the franchise system itself |
| Supply restrictions, rebates and required related agreements | Shows where costs and contractual obligations can sit outside the headline agreement | Affects margins, cash flow, security and conditions that must be satisfied before settlement |
Should you sign the franchise agreement or lease before finance is unconditional?
From the finance side, no, not until you know exactly which lender conditions remain outstanding and which of your commitments are refundable or conditional. Whether you should sign in your circumstances is a legal question for your solicitor. Do not assume a finance approval or a franchise cooling-off right protects you from every contract you sign, and check whether the settlement, lease and fit-out dates can still move if finance does not become ready in time.
The ACCC cautions that a deposit paid before key documents may not be refundable, and its cooling-off guidance is about ending the franchise agreement itself. Do not assume that ending the franchise agreement also ends a premises lease or any other agreement you have signed, because each has its own terms. That is why a finance condition in a business sale contract, any lease condition, deposit terms and the franchise cooling-off provisions need to be read as separate protections rather than treated as one thing (ACCC, Franchising costs that can't be passed on, read 17 September 2026; the cooling-off rules are cited below).
What happens to your money in the cooling-off period?
A cooling-off right can end the franchise agreement, but it is a right under the franchise agreement, not under your loan or your lease. Under the current Code a franchisee may terminate a new franchise agreement within 14 days of entering into it, and limited opt-out rules can apply. If the franchisee terminates in that period, the franchisor must return money paid within 14 days of being notified, although it can keep money for reasonable expenses relating to the termination where those expenses, or how they are calculated, are set out in the franchise agreement (ACCC, Ending a franchise agreement, read 17 September 2026). Whether a lease or any other agreement can also be ended depends on its own terms, which is why lease and finance conditions need legal review before commitment rather than after a finance problem appears.
What happens if your franchise finance is declined after you have signed?
A finance decline does not automatically release you from the franchise agreement, sale contract, lease or any other commitment. The effect depends on the actual conditions and drafting in your documents. A solicitor should review those clauses before you sign. From the finance side, the practical protection is sequencing: use the disclosure window to get a genuine credit view and treat a conditional approval as conditional until the stated conditions are satisfied.
What if something important changes while finance is being assessed?
A material change can require the commercial and finance assumptions to be checked again before you sign. The ACCC says franchisors must disclose materially relevant facts such as certain ownership changes, legal proceedings, insolvency events and changes to important intellectual property. Prospective franchisees must be told relevant new information before they sign, and disclosure documents must be reviewed for accuracy (ACCC, Information and document obligations, read 17 September 2026). If the fact changes the franchisor, the site economics, the lease or an agreement the lender relied on, send the updated material back through the credit process rather than assume the old approval still tells the whole story.
The Franchise Disclosure Register is useful for checking whether a franchisor is registered and for starting due diligence, but the register itself states that franchise information on it is provided by franchisors. Treat the register as a source of questions, not as a replacement for the disclosure document, independent legal advice or the lender's assessment.
How much do you need to put in when you buy a franchise?
What you need to put in is set by the total project cost, the brand, the security you can offer and the lender, so there is no single figure, and the published figures you will find come from parties selling the loan. Search this question and you will find contributions quoted as a share of the total setup cost, as a share of the purchase price, and as a lending ratio against the value of the security. Those are three different denominators. A contribution that looks generous against one is thin against another, which is why the figures on the market appear to contradict each other when they mostly do not. Which basis applies depends on the mix of secured and unsecured business lending in the structure.
So the useful question is not how much, it is how much of what. Before any number means anything, you need to know which of these the person quoting it has in mind.
- Against total setup cost. The fee, the fit out, the equipment, the stock, the opening costs and the working capital, added up. This is the biggest denominator and the one franchisors tend to quote against.
- Against the purchase price. On a resale, what you pay the outgoing franchisee for the business. It excludes anything you spend after settlement, which on a tired site can be substantial.
- Against security value. A lending ratio measured against property or assets a lender can take, which has nothing to do with the cost of the franchise at all.
- Against the fundable portion only. Some lenders will size a facility against the identifiable assets and treat the fee and the soft costs as yours to cover, so the contribution is effectively everything the assets do not carry.
How much will a lender actually lend you for a franchise?
A lender does not simply apply one percentage to the franchise price; it sizes the facilities against the assets and security available, then tests whether the business can service the resulting debt. That is the mirror image of the contribution question, and answering it first usually makes the contribution clearer.
Three things set the ceiling, and they apply in sequence. First, the security ceiling: the sum of what each facility can carry against the asset behind it, which is why an equipment heavy purchase supports more debt than a fee and fit out heavy one of the same price. Second, the servicing ceiling: whether the forecast or actual cash flow covers the repayments with the lender's own buffer applied, which on a new site is tested against a ramp up rather than a mature trading month. Third, the term ceiling: the remaining franchise agreement and lease runway, because a facility that cannot amortise inside that runway gets cut back rather than stretched.
The lowest of those three is your answer. Buyers usually assume servicing is the binding constraint and are surprised when it is security or term, which is why a brand with a long remaining agreement and a lot of registrable equipment can support materially more borrowing than a cheaper brand that spends everything on a licence and a shopfit.
Valuation basis also matters. On a new site, the lender may separate recoverable equipment from leasehold improvements and other soft costs rather than treat every dollar of the project budget as equally fundable. On a resale, the contract price still has to be broken into equipment, stock, goodwill and other components so the lender can see what sits behind each part of the debt. Ask how the lender or valuer will treat the fit out before the final build price is locked.
How do you work out your own franchise contribution?
Your contribution is what is left after each fundable part of the purchase has been sized, so the way to get a real number is to work through the parts in order rather than to apply somebody else's percentage. The method below is the same one a broker uses to sanity check a deal before it goes anywhere. It takes an hour with the disclosure document, the fit out quote and the equipment list in front of you, and it produces a number that belongs to your deal rather than to an average.
- Step 1. Total the whole spend. Fee, fit out, equipment, opening stock, training and launch, plus working capital to the volumes the model assumes, not the headline investment figure. The numbers come from the disclosure document, the fit out quote, the equipment schedule and your own working capital estimate.
- Step 2. Separate the identifiable assets. Work out which line items are named, registrable equipment a lender can value and recover, as against building work and soft costs, using the equipment schedule and the chattel versus building split in the fit out quote.
- Step 3. Establish the valuation basis for the fit out. What the completed fit out is likely to be attributed once installed is what a lender funds against, rather than the invoice, so settle the lender's valuation basis before the build is priced, not at the final progress claim.
- Step 4. Add up the security available. Property, whether yours or a supporting party's, any assets outside the business, and who is being asked to guarantee. Have the conversation with anyone who would be a guarantor before rather than after.
- Step 5. Subtract, then time it. The whole spend less what the facilities will carry is your contribution. Then lay it against the payment sequence, because the timing constraint often bites before the total does.
In practice the contribution moves with what the lender can see and register, not with the brand's reputation. A deal with real property behind it and a clean fit out on identifiable plant needs less cash in than a deal where most of the spend disappears into leasehold improvements and a licence fee. That is the mechanism, and it is stable even when the published percentages are not.
| Factor | What pushes it up | What brings it down |
|---|---|---|
| Security outside the business | No property and no assets outside the business | Property security available, whether yours or a supporting party's |
| What the spend is made of | Most of the spend going into fit out and the franchise fee | A high proportion going into identifiable, registrable equipment |
| Trading history at the site | A new site with no trading history at that location | An established resale with real revenue at that address |
| The brand's position with lenders | A brand no lender has assessed before | A system the lender already holds an accreditation position on |
| Your own file | Adverse credit conduct, or no trading entity yet | Clean personal and business credit, and an ABN with real history |
| Time left to run | A short remaining agreement term, or a lease that ends first | A long remaining agreement term with a matching lease term |
| The fit out against valuation | A specification that has come in above the valuation | A specification priced in line with what a valuer will attribute |
What happens if the fit-out valuation or total project cost comes in higher after approval?
The difference usually becomes an extra contribution requirement unless the lender approves another source of funds or additional security. Approval is normally based on an assumed cost stack and valuation basis. If the builder price rises, a landlord incentive is paid later than expected, equipment deposits fall outside the asset-finance draw rules, or the valuer attributes less to the completed fit out than the invoice total, the original facility does not automatically increase with the cost.
Work the shortfall in this order: confirm whether the changed cost is actually required; separate equipment that may have its own finance from building work and soft costs; ask whether existing approved security can support a restructure; then decide whether the purchase still makes sense at the higher contribution. Short-term property-backed finance can cover a genuine timing gap in some cases, but it should have a defined exit and should not be used to turn an unaffordable project into an apparently fundable one. The detailed mechanics sit in our fit-out finance guide.
Where the gap is real and the timetable is short, some buyers bridge the difference against property they already own rather than shrink the deal, using caveat lending or a second mortgage as short term cover with a defined exit. That is a tool with a cost and a deadline attached, not a substitute for a contribution, and it only makes sense where the exit is genuinely identified before you draw. For a sense of how far the true setup number can run past the headline, the site cost breakdown in what a cafe really costs to open is the closest comparable we publish.
What is franchise accreditation, and what if your brand is not accredited?
Accreditation means a lender has already assessed the franchise system, which can shorten assessment and change how much it will lend against the business; an unaccredited brand can still be financed, but the lender assesses the system itself, and security usually carries more of the weight. It is the one genuinely franchise specific gate in business lending. A brand that has been assessed, whose model the credit team understands and whose failure rate they have seen, moves through a different path from a brand nobody at that lender has looked at before. Buyers often do not learn this exists until they are already committed to a site, which is the wrong end of the process to find out.
Accreditation is not a rating of how good the franchise is. It is a lender's own view, formed from the franchisor's disclosure, the network's size and age, the system's economics and, above all, the lender's own history with the brand. Two lenders can hold opposite positions on the same system, and both can be defensible.
| On the file | Brand sits on a lender panel | Brand sits on no panel |
|---|---|---|
| What the credit team already knows | The model and the cost base are understood before you apply | Every question about the system is asked from scratch |
| What the assessment leans on | Network data as well as your own numbers | The file is read as a standalone small business, not as a franchise |
| A new site with no history | Can often be assessed before it has traded | Much harder to assess, and sometimes not assessable at all |
| Structure and terms | Tend to be settled positions rather than negotiated case by case | Contribution and security expectations typically rise |
| Timing | Usually faster, because the questions are already known | Unpredictable, which matters against a Code timetable that does not stretch |
Indicative practitioner comparison of how an existing lender accreditation position can change the assessment path. Accreditation policies are internal, vary by lender and can change. This table does not predict approval, contribution or timing for a particular application.
What accreditation changes in practice
Accreditation is an internal lender position, not a public endorsement of the franchise. Policies can change, concentration limits can change and different lenders can take different views on the same system.
- It can reduce system-level due diligence. The lender may already understand the model, disclosure pack and typical cost structure.
- It can change structure and contribution expectations. A lender may be prepared to rely more on the system's history where it has an established position.
- It does not approve you or the site. Your credit conduct, contribution, security, experience, lease, fit out and cash flow still have to fit policy.
- It is not permanent. A lender can review or change its appetite, so check the current position before you pay a deposit or sign around an assumed funding route.
Indicative practitioner explanation of how lender panel positions commonly affect a franchise application. Policies are lender-specific and can change. Not a prediction of approval or contribution.
What this means practically is that brand selection is a finance decision as well as a lifestyle one. If you have narrowed to two systems and one of them is widely accredited, that is not a small difference. It changes what you have to put in, what has to be pledged and how long the answer takes. It is worth asking the question before the deposit, not after, and a broker can usually establish a brand's general position across a panel quickly.
What does franchise accreditation not change?
Accreditation is about the system, not about you, and it does not improve your own credit standing. Your own repayment capacity, contribution, experience, credit conduct and security still have to meet the lender's current policy, and the site and lease still have to make sense. A panel relationship is therefore a head start on understanding the brand, not a promise that a particular franchisee will be approved.
Do not treat the absence of a public accreditation list as evidence either way. These positions are usually internal, and a lender can change appetite because of its own concentration, policy or experience even when nothing about the franchise system itself has changed. Ask for the current position rather than relying on a list, an old deal or what another franchisee was told.
How do you check whether a franchise brand is financeable before you pay anything?
Run the same four checks in the same order, before any holding deposit leaves your account, because every one of them is free and none of them needs a credit application. This is the highest value hour in the whole process, and almost nobody spends it at the right time.
- Check the register. Confirm the system is on the franchise disclosure register, which is administered by the ACCC. The information on it is supplied by franchisors and the register does not endorse anyone, so use it to build your list of questions rather than as a verdict (read 17 September 2026).
- Ask the franchisor which lenders have written deals on the system, and how recently. A fair question at any stage. The answer tells you whether the brand has a genuine market position or one relationship, and a franchisor who will not answer it has told you something too.
- Ask a broker to test the brand across a panel. A general accreditation position can usually be established quickly, without an application and without a credit enquiry on your file.
- Read the answer against the disclosure document. If the franchisor names lenders the disclosure document's franchisee numbers and churn do not support, that mismatch is the thing to chase before you commit.
Do this while you are still choosing between brands, not once you have a site in mind. Once a territory is held and a deposit is paid, the financeability of the brand has stopped being a choice and started being a constraint.
What does it mean if no lender will accredit the brand?
A lender declining to accredit a system is a statement about that lender's appetite and information, not a verdict on the business, but when several lenders independently decline to take a position it is information worth pairing with your own due diligence. This is the part buyers most want a straight answer on and most rarely get, so here it is plainly.
There are ordinary reasons a good system sits on no panel. It may be young. It may be small. It may be concentrated in one state, or in a category no credit team has written before, or it may simply never have been put in front of a lender by anyone. None of those mean the franchise is a poor business, and plenty of strong systems fund perfectly well outside bank panels through specialist and non-bank lenders.
What is worth noticing is the pattern rather than any single answer. A system that lenders have written before and have since stepped back from is a different signal from one nobody has ever looked at. You will not get told which of those you are looking at, because accreditation positions are internal and lenders do not publish or explain them. What you can do is run the four checks above, read the answers against the disclosure document, and treat the pattern as one input among several. None of this is a substitute for your own advisers, and no accreditation position tells you whether a particular site will trade.
Everything else on the file is read the way any business purchase is read, and what lenders check first on a business loan sets that out. The strategic question of whether the franchise model is the right structure at all, as against running your own independent site, is a different question again, and we have covered it in franchise versus independent.
Can you get a franchise loan if this is your first business?
Yes, a franchise is a common route into a first business, but with no trading history to read, the lender leans on other evidence. That evidence comes from four places.
- The system's own data, where the brand is accredited. Network performance can stand where your own numbers would be. On an unaccredited brand there is nothing to substitute, which is one reason why a bank may pass on a first-time owner.
- Your contribution, and where it came from. Genuine savings read differently from money that arrived last month. If part of it is a gift or a loan from family, say so early.
- Security outside the business. With no trading history, outside security is often what makes the difference between a facility and a conversation.
- Relevant hands on experience. Years running the same kind of operation for somebody else carries real weight in a credit write up. Set it out properly rather than leaving it as a line on a form.
Set the borrowing entity up early. A brand new ABN with no registration history is a constraint for some lenders, and the entity structure also affects the franchise agreement, the lease and the tax position, so decide it with your accountant before the disclosure documents land. Without history, expect a larger contribution, expect security to matter more, and expect the working capital sizing to be scrutinised harder than anything else on the file.
What security does a lender take on a franchise loan?
A lender usually takes a general security agreement over the business, a director's or personal guarantee, and often property, and which of these it needs depends on the brand, the contribution and the lender. Identifiable equipment is usually secured on its own facility. What it cannot take is the thing that makes the business valuable. The brand is the franchisor's. The system is the franchisor's. The goodwill largely attaches to the network rather than to you. On many sites the lease is held by the franchisor and sublet to the franchisee. Strip those out and what remains to secure is a shorter list than many buyers expect, which is the underwriting problem at the centre of this whole cluster.
What a lender can realistically take usually comes from this set.
- The identifiable equipment. Registrable, valued and recoverable, which can make equipment-heavy franchises easier to structure from a security perspective than asset-light service franchises.
- A general security interest over the business. Broad in theory, thin in practice once the brand and the system are excluded.
- Director guarantees. Common where the borrower is a company, which is why the personal position of the people behind the entity is often reviewed alongside the business.
- Third party or property security. A family home or investment property can materially change the security position, but it also puts that asset behind the business risk.
- The premises, if you own them. A separate purchase with its own assessment, covered in commercial property lending.
A general security agreement can also conflict with what the franchise agreement or the lease allows, so check both before you sign; what a general security agreement can reach is set out separately.
The lease position deserves its own paragraph because franchise buyers can discover its finance effect late. Where you lease or sublease the premises from the franchisor or a franchisor associate, or occupy without a lease at all, the Code requires the franchisor to give you a copy of the lease, a copy of any occupancy agreement, the information a lessor must give a lessee under the relevant state or territory retail tenancy laws, and information about any incentive or financial benefit the franchisor or associate gets because of that lease or occupancy arrangement (ACCC, Leasing and other agreements related to a franchise, page updated 12 July 2026, read 17 September 2026). Those documents are not paperwork. They tell a credit team whether your occupancy survives a dispute with the franchisor, and that answer changes what the file is worth.
Should you increase your home loan to buy a franchise instead?
An increase against your home is a different product from a business facility, not a simpler version of one, and it is worth understanding the trade before you take it. A common outcome for a first time franchise buyer is that a property-secured option is easier for the bank to assess than the business itself. That is not automatically a bad answer. Depending on the lender and structure, property-secured finance can be lower cost or quicker to arrange than higher-risk business lending, but the trade is that the property carries more of the risk.
What it does is move the whole risk onto one asset and take the franchise out of the credit assessment altogether. Nobody underwrites the brand, nobody tests the fit out valuation, and nobody sizes the working capital, because the loan is not about the business at all. That means the discipline the finance process would have imposed simply does not happen, and the shortfall that a business lender would have made you confront in advance surfaces later, secured against the house. It also uses up the security you would otherwise have had available to support the business as it grows.
A middle position is to use property security deliberately and in part, as one component of a structure rather than as the whole structure. Which security answers better on a purchase depends on the deal rather than on a rule, and we have set the comparison out separately in residential security or commercial security on a purchase.
Can you use equity in property you already own to buy a franchise?
Where suitable property equity is available, property-secured finance can support a larger share of a franchise purchase, and the thing to get right is which part is structural and which part is a bridge. Those are two different products doing two different jobs, and they are frequently discussed as though they were one.
The structural version is a facility secured by property, taken deliberately as part of the funding mix. Because it is secured by real property it can price differently from higher-risk business lending, and the trade is the one set out above: risk concentrates on one asset and the security is no longer available for anything else. Used in part, alongside equipment finance and a working capital line, it is often exactly the right answer.
The bridge version is different. Caveat lending and a second mortgage are short term cover against property you already own, and they exist to close a gap that has a known end date: a settlement that has moved, a fit out claim that landed above the valuation, a franchisor consent that ran long. They carry a cost and a deadline, and they only make sense where the exit is identified before you draw, not hoped for afterwards.
The failure mode is treating the second as though it were the first. A bridge with no identified exit is not cheap funding with a long runway, it is a deadline you have bought. If property equity is going to be part of the structure, decide that at the start and size it as structure. If it is covering a gap, name the exit and the date in the same conversation.
Be clear about what that means before you sign. Borrowing against your home to buy a franchise is borrowing for a business purpose, even though the security is the place you live. If the business fails, the home is the asset the lender can look to, and losing the franchise does not change that. How the loan is documented, who the borrower is, what the stated purpose is and who signs all matter, so get legal advice on the documents before you draw. The comparison of buying with the property or without it sets out the wider trade.
Who has to sign a guarantee?
Expect every director of the borrowing entity to be asked for a personal guarantee, and expect the question of whether a spouse or partner signs to come up wherever they have an interest in the security. Franchise agreements are usually granted to a company, and both the franchisor and the lender then look through the company to the people behind it. The franchisor typically takes guarantees under the franchise agreement, and the lender takes its own under the facility, so there are commonly two sets of obligations sitting over the same people.
One legal distinction is worth knowing before you put a home behind the deal. ASIC explains that the National Credit Code and responsible lending regime apply to consumer credit based on the borrower and predominant purpose; a loan to an individual predominantly for a business purpose is generally outside those responsible-lending obligations, even when the security is the borrower's home. A loan to a company is also generally outside that consumer regime. That does not mean a lender ignores affordability; it means you should not treat a business-purpose approval as a substitute for your own legal, accounting and cash-flow advice (ASIC, National Credit Code, read 18 September 2026).
The practical point is to have that conversation before an application rather than at signing. Where a property is held jointly, the party who is not involved in the business is still being asked to put the asset behind it, and that is a decision they are entitled to make with their own independent advice and their own time. Discovering it at the last minute is how otherwise sound deals stall. If a guarantee is already in place, getting released from a guarantee is its own process with the lender, and it is worth understanding before you sign another.
Which franchises are easiest to finance in Australia?
There is no universally easiest franchise category to finance; from a security perspective, transactions are usually easier to structure when more of the spend sits in identifiable equipment or property and harder when most of it disappears into a licence fee, leasehold fit out or other soft costs. That is about what supports the debt, not about which category is a better business, and it applies to café and quick service franchises as much as anywhere.
| Category | Where the money mostly goes | How it tends to fund |
|---|---|---|
| Mobile, van or trailer based | A vehicle and the plant fitted to it, plus the fee. No premises, no lease, little or no fit out | Often the cleanest category to structure from an asset-security perspective. The vehicle and fitted plant are identifiable, registrable and recoverable, and there is no premises fit out to write off |
| Food and beverage, fixed site | A heavy fit out to specification, specified kitchen and refrigeration equipment, stock and a long lease | Split. The named equipment funds well on its own facility. The fit out is the drag, because it is the largest single line and the weakest security |
| Fitness and gym | Very heavy equipment, a substantial fit out and a long lease over a large floor plate | The equipment carries a lot, but the agreement term and the lease term matter more here than in most categories because the payback runs long |
| Retail, fixed site | Shopfit, signage, point of sale and opening stock | Harder than it looks. Stock is poor security and a shopfit is a leasehold improvement, so the fundable proportion is smaller than the total spend suggests |
| Service, home or office based | Mostly the franchise fee, training, systems and working capital. Sometimes a vehicle | Lowest total cost and often the hardest to secure, because there is very little to register. Frequently the largest contribution as a proportion of the spend |
| Any category where you buy the premises | The freehold, which is a separate purchase, plus everything above | Changes the answer entirely. A registered mortgage does most of the work and the rest of the structure sits behind it |
Indicative practitioner comparison of how asset mix and security are commonly assessed. Not a lender policy table and not a prediction of approval.
Is a cheaper franchise easier to finance?
No, and often the opposite. A low cost service franchise with almost no assets can be harder to fund, as a proportion of its cost, than a pricier food site with equipment behind it, because the contribution follows the fundable proportion rather than the price tag. Work it through with the five step method.
What do finance friendly franchise lists actually mean?
Published lists of finance friendly franchises are usually accreditation lists, and accreditation is a lender relationship rather than a property of the category. A listed system may move faster, but it says nothing about your site, your fit out valuation or your contribution, which come from the mechanics above and from the brand's accreditation position.
Should you use the franchisor's recommended finance panel?
The franchisor's panel is often the faster path because those lenders already know the system, but compare it with the wider market and ask what the franchisor receives from the arrangement. You are not required to use it, and nothing stops you running your own option alongside it. The panel can be a fast route through a known system, and it is not the same thing as the whole lending market. Whether your franchise documents impose any condition connected with finance or approval is a legal question for your solicitor. From a funding perspective, the useful comparison is between what the panel can do quickly and what an independent lender search can do with your own security, structure and timetable.
What the panel actually is, is a set of relationships the franchisor has built. Those lenders hold an accreditation position on the system, their credit teams have written the model before, and the paperwork they ask for is the paperwork the franchisor already produces. That is a real advantage, particularly against a fourteen day waiting period, and particularly for a first site.
What the panel is not, is a survey of the market. It tells you what those lenders will do. It does not tell you what the market will do, and it was not assembled with your security position, your structure or your other borrowings in view, because none of those were known when it was assembled. Both of those things are true at once, which is why the useful move is to ask questions rather than to accept or refuse.
| Question to ask | Why it matters |
|---|---|
| Who is paid by whom, and how? | A referral arrangement is not a problem, and it is common. Not knowing it exists is the problem. Ask plainly and expect a plain answer |
| Is the accreditation held by the lender, or arranged through this broker? | If the position sits with the lender, other brokers can usually reach it too. If it is relationship specific, your options genuinely narrow |
| Does my choice of financier touch your approval of me in any way? | It generally should not. Getting the answer in writing removes an unspoken pressure from the rest of the process |
| Which lenders have written deals on this system, and how recently? | Tells you whether the panel is one relationship or a genuine market position, and it is a fair question at any stage |
| What happens if the panel declines me? | Establishes in advance whether there is a route on, and whether a decline affects the territory or the timetable |
| Will the fit out be valued, and on what basis? | The panel financier knows the answer for this brand's build. It is the number that most often moves late |
A practical approach is to let the panel do what it is good at while keeping a second view on structure. The panel is optimised for speed inside a known system. An independent view is optimised for your circumstances, your security and what happens after settlement, which is where the second and third site conversations start. Neither replaces the other, and running both costs you nothing but a few conversations. Either way, what any lender checks first is the same list.
Compare first and apply second. You can ask a panel lender, broker or alternative funder about policy, accreditation, structure and likely document requirements without turning every conversation into a formal application. Once a formal application is lodged, a credit enquiry may be recorded against the business and, depending on the structure, the directors personally. If you are testing more than one route, decide which applications are actually necessary; our guide to how lenders read multiple credit enquiries explains why the sequence matters.
Who else do you need on a franchise purchase besides a lender?
A franchise purchase usually needs four people, and three of them are not the lender: a solicitor who reads franchise agreements, an accountant, a finance broker, and where the site is built, a builder or project manager who has done that brand before. Each one answers questions the others cannot, and the common failure is asking one of them a question that belongs to another.
- A solicitor, ideally one who reads franchise agreements regularly. Owns the agreement, the lease, the transfer, the deposit terms, the finance condition and what your cooling-off right does and does not reach. Engage before the disclosure pack lands, not after.
- An accountant. Owns the entity structure, the GST and going concern position on a resale, the tax treatment of the fee and the royalties, and anything involving superannuation. The entity decision in particular is hard to unwind once the agreement and lease are signed in the wrong name.
- A finance broker. Owns the facility mix, the security question, the accreditation check across a panel, and the sequencing of conditions against the Code clock. Useful earliest, before a brand is chosen, which is the opposite of when most people call one.
- A builder or project manager familiar with the brand's specification. Owns the fit out price and, indirectly, the valuation gap that is the single most common late surprise on a new site.
The sequencing matters as much as the list. The solicitor and the broker both need to be engaged inside the disclosure period, because that is the window where their answers can still change what you sign. The accountant needs to be engaged before it, because the entity decision comes first. Leaving any of them until after signing turns advice into damage control.
How long can you borrow for on a franchise loan?
For many franchise-specific facilities, the remaining franchise agreement and lease term constrain how long the lender will write the debt, although property-backed or separately secured facilities can be structured differently. The lender does not want the core business debt to rely on a right to operate that expires first. Inside that constraint, the exact term still depends on the facility, security, asset life and lender policy.
This is the clock that has nothing to do with you as a borrower, and it is the reason two identical applicants can be offered materially different structures on the same brand. One is buying at the start of a term. The other is buying with a few years left to run.
Think of the remaining agreement and lease runway as a credit constraint rather than a universal formula. A lender may shorten the term, require faster amortisation, rely on a documented further term, or structure separately secured debt on a different basis. The important point is that an expected renewal is not the same thing as a renewal that has already been granted and documented.
The renewal point is the one that surprises people. The ACCC says a franchisee can usually renew or extend, depending on the terms of the franchise agreement, and a right to a further term can come with conditions attached. There is a process, and there is notice, but the outcome depends on the agreement's own terms. A lender reads that plainly: a renewal you hope for is not a renewal it can lend against. If the remaining term is short, expect the term of the facility to be cut back to fit, expect amortisation to be faster, and expect the monthly commitment to be higher as a direct consequence.
Two further provisions sit in the same area and are worth knowing before you sign. From 1 November 2025, franchise agreements must provide for compensation for early termination when a franchisor withdraws from the Australian market, rationalises its networks in Australia or changes its distribution models in Australia (ACCC, Ending a franchise agreement, read 17 September 2026). The ACCC's current guidance says the compensation mechanism must consider lost profit from direct and indirect revenue, unamortised capital expenditure requested by the franchisor, loss of opportunity in selling established goodwill, and the costs of winding up the franchised business (same ACCC page, read 17 September 2026). That is the closest thing in the Code to an answer to the question every fit out borrower eventually asks, which is what happens to the loan if the brand leaves.
Where the premises are leased or subleased from the franchisor, the lease term becomes another clock, and the Code's leasing disclosure exists so you can see it before you commit (ACCC, Leasing and other agreements related to a franchise). If you hold a leasehold interest and are funding a fit out inside it, the split between what belongs to the building and what belongs to you matters for both security and tax, and funding a fit out in leased premises works through it. Equipment inside the fit out is a different case, because equipment finance matched to the asset's life can run on its own term inside that ceiling.
A franchisee three years into a five year term wants to refinance the original fit out and equipment over a longer run to lift monthly cash flow. The equipment has useful life left, the site trades consistently, and the numbers work comfortably on paper at the longer term.
The constraint is not the numbers. With two years to run and no further term yet agreed, the credit team will not price a facility that outlives the right to operate. The realistic outcome is a shorter term that lands inside the current agreement, with the option to look again once a further term is granted and documented. The monthly commitment goes up rather than down, which is the opposite of the reason the conversation started.
The lesson generalises. If a longer term matters to you, the time to deal with it is before renewal, not after, and the franchisor's notice obligation is the trigger to have the conversation.
Should you buy a new franchise or an existing one?
An existing franchise is often easier for a lender to assess because there is real trading history at that address; a new site relies more heavily on the franchise system, your contribution, security and projected cash flow. For a lender these are two different transactions wearing one word. A new franchise is a start up with a recognisable brand attached. An existing franchise, a resale, is a going concern purchase with a franchisor sitting in the middle of it. The finance follows that split, and so does the risk.
| What changes | New franchise | Existing franchise (resale) |
|---|---|---|
| What you are buying | A licence, a territory and the right to build a site from nothing | A trading business, its equipment, its staff and the balance of a term |
| What the lender can actually assess | The system, the model and you. No trading history at that location | Real revenue, real margins and real seasonality at that address |
| What secures the loan | New equipment, a director guarantee and usually outside security | Existing equipment, a general security interest, commonly outside security as well |
| What the franchisor has to agree to | Granting the agreement and approving the site | Consenting to the transfer, which the franchisor cannot unreasonably withhold |
| Where the risk concentrates | Getting to the volumes the model assumes, and funding the burn until then | Whether the trading history you are paying for survives the change of owner |
The consent point in row four is the one that reshapes a timetable. A franchisor cannot unreasonably withhold consent to a transfer (ACCC, Selling or transferring a franchise agreement, read 17 September 2026). The ACCC also explains a specific backstop: if the franchisor has not refused in writing, the outgoing franchisee can generally assume consent after 42 days from the later of the written transfer request or, if more information was requested, the date the franchisor received the last piece of that information. That does not make every transfer a 42-day process. It means the consent clock needs to be started properly and the information request needs to be completed, while the finance approval runs beside it. Consent to the transfer is not the buyer's finance approval: one comes from the franchisor, the other from the lender.
The going concern question also has a tax limb. The ATO states that the sale of an existing franchise by a franchisee may qualify as a GST free sale of a going concern (ATO, Franchising and tax, read 17 September 2026). Whether it does on your deal turns on the conditions being met, which is an accountant's call, not a broker's, and getting it wrong changes the cash you need at settlement. We have set out the general mechanics in going concern explained and defined the term in the going concern glossary entry.
Where the outgoing franchisee is carrying part of the price rather than taking it all at settlement, that is a vendor finance structure and it has its own rules, its own risks and its own effect on what a lender will approve. That sits outside this guide, in our guide to vendor finance.
What financial records does a lender check when you buy an existing franchise?
A lender usually starts with the seller's historical financials and then checks whether the revenue and profit you are buying are repeatable after the owner changes. The exact document list varies by lender and deal, but an existing-site assessment commonly works through several years of financial statements and tax information, BAS, sales evidence and bank conduct where available, then reconciles those numbers to the lease, royalties, wages, equipment, stock, working-capital requirement and the price being paid for goodwill.
- Revenue. Is the turnover shown in the accounts supported by BAS, sales records, bank deposits or point-of-sale information where available, and is there obvious seasonality?
- Maintainable profit. Which expenses continue after settlement, and which claimed add-backs are genuinely owner-specific rather than costs the buyer will still have?
- Rent, royalties and labour. These are recurring obligations that survive the change of owner and therefore belong in the lender's repayment model.
- Equipment, stock and goodwill. The lender separates assets it can identify and value from goodwill, which is part of the purchase price but weak security on its own.
- Remaining term and future spend. A profitable site can still be hard to finance if the lease or franchise term is short, a refurbishment is imminent or the buyer needs materially more working capital immediately after settlement.
Australian Government guidance tells buyers of an existing business to independently review financial records, including tax returns, BAS, accounts receivable and payable, balance sheets, profit and loss records, cash flow statements and sales records, alongside contracts, leases, assets and liabilities (business.gov.au, Buy an existing business, read 18 September 2026). A lender is not doing the buyer's due diligence for them, but much of the evidence overlaps because both are trying to establish what business actually exists behind the asking price.
Goodwill is where a franchise resale can become difficult to structure because goodwill is part of the price but is not the same kind of recoverable security as equipment or property. A lender therefore looks closely at the site's actual trading history, the remaining franchise and lease term, the purchase price allocation and the amount of hard security elsewhere in the deal rather than assuming a future resale will repay today's goodwill debt.
On a resale, part of what you pay is goodwill, and how the goodwill in a resale gets funded is often the hardest part of the structure. Where the sale is offered walk in walk out, with stock and equipment included, check exactly what is in the price before the lender values it.
Is it easier to finance a second or third franchise site?
Financing an additional site can be easier to assess than the first because the existing site gives the lender real trading history in that system rather than only a network average. That can improve the quality of the evidence available to credit, although the group still has to carry the new site's ramp-up and any existing debt.
Three things move to the front of the assessment. The franchisor has to approve you for the additional territory, which is its own process with its own criteria and often its own performance requirements on the existing site. The lender looks at whether the security over the existing business is already fully committed, because a second facility usually needs something behind it. And the servicing test becomes a group test: the question is whether both sites together carry both sets of repayments through the new site's ramp up, at a point when the new one is consuming cash rather than producing it.
The practical implication is that a clean, well documented first site is the deposit for the second one. If a second site is anywhere in your plans, keep the first one's records in the shape a credit team wants to read, and have the conversation before the territory comes up rather than when it does.
Can you refinance a franchise once it has real trading history?
Yes. Once the site has real trading history, a refinance can be assessed on the business that actually exists rather than only on the opening forecast. The lender will still read the remaining franchise term, lease term, security and group cash flow, but actual BAS, financials and bank conduct can replace some of the uncertainty that sat in the original start-up application.
The reason to separate this from second-site finance is purpose. A refinance changes the existing facility stack, repayment term or security. A second-site facility asks the group to carry another ramp-up at the same time. If the first site's original short-term or property-backed structure was only meant to get the doors open, the refinance conversation belongs on the calendar before the facility becomes urgent. See the refinancing glossary for the general mechanics.
Real trading history can also create an opportunity to change the security structure, but it does not automatically get the family home released. A replacement lender still has to be satisfied with the business cash flow, remaining franchise and lease term and the security left after the property is removed. If the original facilities are cross-secured, releasing one property may require the whole facility stack to be refinanced or re-documented rather than simply deleting that asset from the existing loan. If property was only intended as start-up support, make the release test part of the refinance plan from the beginning rather than assuming time in business will produce it automatically.
A buyer agrees terms on a resale, gets a finance approval subject to the usual conditions, and assumes the franchisor's consent is a formality that will follow. The franchisor's process asks for information the buyer has not prepared, and the request goes back and forth while the finance approval sits on a clock of its own.
Nothing has gone wrong, and nobody has behaved unreasonably. The two processes simply were not run together. The workable version starts the transfer request and the finance application in the same week, treats the franchisor's information list as a document requirement rather than an afterthought, and keeps the settlement date honest about both.
What does a franchise cost beyond the franchise fee?
The franchise fee is only one part of the real entry cost, and on a premises-based franchise the fit out, equipment and opening cash runway can be larger. The budget needs to include fit out to specification, equipment, opening stock, training and launch costs, working capital until the site reaches a sustainable trading rhythm, and the royalties and levies that continue after opening.
Two of those categories are worth pulling apart, because the Code now says something useful about each.
- Significant capital expenditure. The disclosure document must cover why the expenditure is needed, the amount, timing and nature of it, the anticipated outcomes and benefits, and the expected risks. A franchisor must not enter an agreement unless they discuss all significant capital expenditure with the prospective franchisee and explain how that franchisee is likely to recoup it (ACCC, Disclosing significant capital expenditure, page updated 12 July 2026, read 17 September 2026). A refit obligation three years out is a funding event, and it belongs in the plan now.
- Specific purpose funds. A specific purpose fund is money set aside for a specific common purpose related to running the franchised business, and it includes marketing funds. From 1 November 2025 the franchisor must prepare an annual financial statement within four months of the end of the financial year, have it independently audited within four months unless 75 per cent of contributing franchisees vote against auditing, and give the statement to franchisees within 30 days of preparation (ACCC, Specific purpose funds for franchise businesses, page updated 12 July 2026, read 17 September 2026). Contributions to it are a fixed cost against your margin, not an optional marketing spend.
- Costs the franchisor cannot pass on. Franchisors can only pass on the legal costs of preparing, negotiating and executing the franchise agreement, and cannot include terms requiring the franchisee to pay the franchisor's costs of settling a dispute (ACCC, Franchising costs that cannot be passed on, page updated 14 October 2025, read 17 September 2026). Worth checking against what you have been invoiced.
The disclosure document must include as much information as practicable about required significant capital expenditure, and ACCC guidance gives store refurbishment on a regular schedule as an example, so a lender will expect those costs in your budget (ACCC, Disclosing significant capital expenditure, read 17 September 2026).
On the funding side, the practical split is between what a lender can identify and what it cannot. The building work in a fit out generally cannot be separated and recovered. The named equipment inside it generally can, which is why the chattel and building split is not an accounting nicety but a security question, set out in the fit out chattel versus building split. Where a resale comes with usable plant, second hand assets can still be funded, with a shorter list of lenders and tighter conditions, which we cover in second hand equipment finance. And the category buyers often under-size is the one after opening: working capital in the first 90 days after takeover is the closest model we publish to how a new franchise site actually consumes cash.
What if the franchisor requires a refurbishment, rebrand or technology upgrade later?
Treat a required refurbishment or major upgrade as a future funding event when you assess the franchise today, not as a problem for the future owner of the business. Current ACCC guidance says significant capital expenditure can include major refurbishments, relocations, rebranding, equipment, software and technology upgrades, and the disclosure document must include as much information as practicable about the amount, timing, nature, expected benefits and risks. The franchisor must also discuss required significant capital expenditure with a prospective franchisee and explain how the franchisee is likely to recoup it (ACCC, Disclosing significant capital expenditure, read 18 September 2026).
For finance, put the future spend on the same timeline as the remaining agreement term, lease expiry and any renewal conditions. A refurbishment shortly before renewal can create a second contribution problem after you have already funded the original purchase. Ask who pays, when it is expected, whether landlord works or incentives offset any part of it, and whether the remaining term after the spend is long enough for the business to carry new debt.
How much working capital should you keep for the first months after opening?
Do not size post-opening working capital as a percentage of the franchise fee; size it to the cash-flow gap between opening day and a conservative sustainable trading month. Build a week-by-week view of rent, wages, superannuation, supplier terms, royalties, levies, loan repayments, stock replenishment and any rent-free period ending, then stress the opening date and revenue ramp rather than assuming the franchisor's target month arrives on schedule.
The important distinction is between money required to finish the site and money required to survive the first trading cycle. A facility can fully fund the approved fit out and still leave the business short if supplier deposits, payroll and rent land before customer cash settles into a normal rhythm. For a worked example of that transition, the first 90 days of cafe working capital is the closest operating model on this site. Use the cash-flow method, not the cafe numbers, for your own franchise. Where the gap is real, a working capital facility sized at approval is usually easier to arrange than one added later, and the working capital glossary entry explains the term.
Are franchise fees and royalties tax deductible in Australia?
The initial franchise fee is not deductible, because the ATO treats it as part of the cost base of a capital asset, while royalties, interest and levies are generally deductible as ongoing business expenses. The tax treatment splits along the same capital and expense line as the finance does, which is why it is worth settling with your accountant at the same time as the structure.
The ATO states that the franchise establishment fee or transfer fee forms part of the cost base for your franchise licence, which is a capital asset, and because these fees are a capital investment in your business they are not tax deductible. Royalty payments, interest payments and levies to the franchisor can be claimed as an expense on your annual tax return, because they are an ongoing expense in running your business (ATO, Franchising and tax, page last updated 8 November 2022, read 18 September 2026).
Three further points from the same ATO page are worth raising with your accountant, because they are commonly missed.
- Renewal fees are not automatically capital. Where a renewal fee forms part of your cost base it is not deductible, but a renewal fee not included in the cost base may be deductible as a business expense and subject to the prepayment rules. The ATO's own example of a fee that would not go into the cost base is one covering a relatively short period, such as five years, where you would be left with no franchise if you did not pay it.
- Ongoing training fees are deductible. Fees paid to the franchisor for ongoing training of employees in their roles can be claimed, which is a different treatment from the initial training bundled into the establishment fee.
- Payments to an overseas franchisor carry withholding. Where you pay royalties or interest to a non-resident franchisor, withholding generally applies at a flat 30 per cent on the gross royalty and 10 per cent on the gross interest, unless a tax treaty with that country sets a different rate. You report and pay the withheld amounts through your BAS, and you can only deduct the payment if the withholding has been paid. On an internationally owned brand this is a real cash and compliance obligation, not a formality.
If you are registered for GST and the franchisor is too, the ATO says you may be able to claim a GST credit for the GST included in the initial franchise fee, renewal fees, service fees or royalties, advertising fees, transfer fees and training fees. On transferring or ending a franchise there may be both capital gains tax and GST consequences, and the sale of an existing franchise by a franchisee may qualify as a GST-free sale of a going concern (same ATO page, read 18 September 2026). That is general information about the treatment, not advice on your circumstances, and the deductibility of anything on your particular deal is a question for your accountant.
A new site franchisee builds to the franchisor's specification. The specification is not negotiable, the builder's price reflects it, and the finished fit out costs meaningfully more than the valuer attributes to it once installed. The lender funds against the valuation, not against the invoice.
The gap is real, it is nobody's mistake, and it was not in anyone's budget. It has to be funded from the buyer's own cash, from outside security, or from a shorter term facility with a defined exit. The version of this that ends badly is the one where it is discovered at the final progress claim.
The version that does not end badly is the one where the specification is priced and the valuation basis is understood before the agreement is signed, which is exactly what the Code's capital expenditure disclosure is there to make possible.
Why do franchise loans get declined?
A decline usually means the application did not fit that lender's policy on the day, most often because of the brand, the agreement term, the security or the numbers. A file can certainly fail on the borrower, the security, the agreement term or the projected cash flow, and the general reasons a business purchase loan fails, including thin servicing, short ABN history, credit conduct and an unrealistic price, apply here exactly as they do anywhere else. They are covered in the parent guide, getting a loan to buy a business. What follows is the layer on top of that: the reasons that only exist because the business is franchised.
From our broking files (indicative, general information)
Basis: Switchboard broking experience. As at September 2026. These are the franchise specific patterns we see stop otherwise workable files.
- The brand is on no lender's panel and the system's history is thin. A system nobody has assessed is read as a standalone small business rather than as a franchise.
- The agreement term left is shorter than the loan term asked for. A renewal the borrower expects is not a term the lender can price until it is granted.
- Franchisor consent is still outstanding. Consent to the loan, the lease or the transfer has not landed, and the lender will not settle around it.
- The cash contribution is itself borrowed and not disclosed. When the source surfaces in verification, the file stops.
- The only forecasts are the franchisor's. A credit team wants the numbers tested against your site, not only the system's own projection.
Patterns we see, not a prediction for your application. Indicative only, stated as direction rather than as figures. Actual outcomes depend on lender policy and your circumstances at the time of application. Not financial advice.
The pattern across all five is the same. Each one is knowable before an application is submitted, and each one is expensive to discover afterwards. The accreditation position can be checked. The agreement term is on the agreement. Consents can be requested early. The source of the contribution can be disclosed up front. The forecasts can be tested before a lender tests them. None of it requires a credit decision to find out.
Two situations sit outside that pattern and are worth naming plainly. Where credit history is the obstacle rather than the franchise, the question changes shape entirely and belongs with bad credit business lending, where the assessment is about conduct and recovery rather than about the brand. And where a deal is sound but the timetable has run out, short term options including private lending exist, with a cost and a defined exit attached, and they are a bridge to a solution rather than the solution. Neither is a way around a franchise specific problem. They answer different questions.
What can you do if a franchise lender declines you?
Start by identifying whether the decline is a lender-policy problem or a deal problem before making another application. A different lender can have a different view on franchise accreditation, industry appetite, security or facility structure. It cannot make inadequate cash flow, an unaffordable contribution, a short agreement term or a genuine valuation gap disappear. What a bank's no actually means is worth reading before you reapply anywhere.
- Brand or policy decline. Another lender or specialist franchise financier may still consider the system if its policy or accreditation position is different.
- Security or valuation gap. The answer may be a larger contribution, a different asset-finance split, suitable property security or a change to the transaction, not simply another unsecured loan.
- Serviceability or working-capital shortfall. More expensive debt does not fix a business that cannot carry the repayments and opening cash burn. Rework the purchase price, contribution, facility amount or operating assumptions first.
- Timing problem. Short-term property-backed or private finance can sometimes bridge a defined timing gap, but it needs a credible exit and should not be used to disguise an underlying affordability problem.
- Missing information or poor sequencing. Complete the disclosure, lease, valuation, entity and financial evidence before deciding whether a new application is actually justified.
The objective after a decline is not to find a lender willing to say yes at any cost. It is to work out whether the first lender rejected that lender's version of the deal or whether it exposed a problem the next lender will see too.
Where a franchise is one of several things you are weighing up, the wider set of options for people running their own business sits in the business owners finance hub.
What happens to your loan if the franchise ends or the franchisor collapses?
The loan survives the business. A franchise agreement can end, a site can close and a sale can fall through, and none of those events repay the facility or release a guarantee. That is the single fact to hold on to, because many mistakes at this point come from assuming that dealing with the franchisor also deals with the lender. They are separate contracts, on separate timetables, with separate consequences.
What follows is general information about how the pieces fit together, not advice on any particular situation. If you are in this position, a solicitor is the first call, not the last, and the Australian Small Business and Family Enterprise Ombudsman publishes best practice guidance on franchisee initiated exit that is free and worth reading before you do anything else. Among the questions it tells franchisees to ask before exiting is "Will it trigger an obligation to repay a bank loan?", along with whether an exit will trigger liability under personal guarantees (read 17 September 2026).
| What is happening | What it does to the business | What it does to the loan and the guarantees |
|---|---|---|
| You sell and the franchisor consents | The agreement transfers to the incoming franchisee and you exit | The cleanest route. Proceeds go to discharging the facilities at settlement, and guarantees are released only once the lender is actually repaid and confirms it in writing |
| The franchisor is slow to consent, or refuses | You keep operating, or keep paying, while the transfer sits unresolved | Repayments continue throughout. A franchisor must not unreasonably withhold consent, but that is not the same as promptly, and the lender's position does not pause while it is argued |
| You propose ending the agreement early | The franchisor must give a substantive written response within the time the Code sets, covered in how long you can borrow for | Nothing automatic. Ending the agreement does not end the facility, and unamortised fit out is the part that most often has no asset left behind it |
| The agreement reaches the end of its term | Whether there is a further term depends on the franchise agreement's own terms | This is why lenders usually try to keep the facility inside the remaining agreement and lease runway rather than rely on a renewal that has not happened |
| The franchisor exits the Australian market or restructures | From 1 November 2025, franchise agreements must provide for compensation for early termination when a franchisor withdraws from the Australian market, rationalises its networks in Australia or changes its distribution models in Australia | Compensation must take account of unamortised capital expenditure the franchisor requested, which is the closest thing in the Code to an answer on the fit out debt |
| You stop trading without selling | The site closes and the equipment is what is left | The worst outcome for the facility. Equipment finance is secured against assets that are now second hand, the general security interest covers a business no longer trading, and the guarantees remain |
General information as at 17 September 2026, not advice on any particular situation. The Code obligations in rows two, three and five are set out on the ACCC's pages for selling or transferring a franchise agreement and ending a franchise agreement, both read 17 September 2026, and are covered in more detail in how long you can borrow for above.
When are guarantees released after you sell or close a franchise?
Selling or closing the franchise does not itself release every guarantee; each guarantee or security has to be discharged under the document that created it. The lender's personal or director guarantee is tied to the lending obligations, a lease bank guarantee belongs to the landlord relationship, and any guarantee given to the franchisor sits under the franchise documents. One settlement can deal with several of them, but they are not the same instrument.
For the lending side, do not treat the sale as complete from your perspective until the lender has received the required payout, discharged the relevant security and confirmed any guarantor release that is meant to occur. The same discipline applies to a landlord bank guarantee or franchisor guarantee: check the release mechanism, expiry or return conditions in the underlying document. If a facility, lease or claim remains outstanding, the guarantee may remain relevant even though the shop has changed hands or stopped trading. See the director guarantee guide for the lending side of that risk.
What happens to your loan if the franchisor goes into administration or collapses?
Your loan is a contract with your lender, separate from your franchise agreement, so the franchisor's failure does not by itself change what you owe. Repayments, security and any guarantees continue on their own terms while the franchisor's position is worked out. What can change is the business the loan was lent against, and the lender will want to hear about it from you early.
Talk to your lender as soon as you know, not once the picture is clear, and get a solicitor to read your franchise agreement and any notices you receive from an administrator or other appointee before you act on them. The Code also sets a compensation rule for some early endings: From 1 November 2025, franchise agreements must provide for compensation for early termination when a franchisor withdraws from the Australian market, rationalises its networks in Australia or changes its distribution models in Australia. Whether that applies to your agreement is a question for your solicitor. For the personal side, see what happens to a director's guarantee.
When should you tell your lender the franchise is in trouble?
As soon as you know, not once the business problem is solved, because a lender told early has options and a lender told late has fewer. A common practical mistake is to wait for the business problem to be solved before starting the lender conversation, and it is understandable: the instinct is to fix the business first and tell the bank once there is good news. The problem is that the useful responses, restructuring a term, moving to interest only for a period, agreeing a sale window, releasing an asset to be sold, all require time and a lender that does not feel it found out last.
The same applies to the franchisor. A transfer request lodged while the site still trades is a different conversation from one lodged after it has closed, both for the franchisor's consent and for what a buyer will pay. Sequencing is most of what you control here.
What do you still have to pay while a franchise is being sold or closed?
Everything keeps running. Rent under the lease or occupancy agreement, royalties and specific purpose fund contributions for as long as the agreement runs, wages and superannuation, supplier accounts, and the loan repayments themselves all continue on their own schedules. Employee entitlements and superannuation in particular are not something to defer while other things are sorted out, and they sit with your accountant and a solicitor rather than with a broker.
If the underlying problem is a short term cash gap in an otherwise sound business rather than a failing one, that is a different question with different answers, and it belongs with working capital rather than here. Where credit conduct has already been affected, bad credit business lending explains how that assessment changes. Where a business is genuinely in financial difficulty, the advice you need is legal and insolvency advice from a solicitor or a registered practitioner, and no broker, including us, is the right first call for it.
Franchise finance is usually a stack of facilities rather than one generic loan, and the hardest part is often the sequence rather than the headline amount. Your contribution has to cover what a lender will not fund and what falls due before the lender can draw. The Franchising Code adds its own timetable, while the lease, fit-out, equipment, transfer consent and working-capital clocks keep running beside it. Before you commit, get the brand position, agreement and lease runway, valuation basis, deposit dates, remaining lender conditions, opening cash requirement and any future refurbishment obligation onto one timeline.
Key takeaway: the finance decision starts before the application. The best time to find a brand, term, lease, valuation or contribution problem is while you can still change the transaction.Frequently asked questions about franchise loans
Yes. Most franchise buyers combine a business loan with equipment finance and their own contribution, rather than taking one loan for everything. The lender assesses you, the franchise brand, the site and the security together, and the parts of the purchase with identifiable assets are the easiest to fund. The general mechanics of buying a business apply on top of the franchise specific checks.
Yes. Banks and non-bank lenders both finance franchise purchases, but the route depends on the brand, the security, the site and your own file. A lender that already has an accreditation position on the system may assess the brand faster; an unaccredited system can still be financed, usually with more system-level due diligence and more weight on your contribution or security.
There is no single franchise loan rate because a purchase is often split across business lending, equipment finance and sometimes property-backed finance. Each facility is priced against its own risk and security, so compare the total structure, fees, term and security used rather than one headline rate. Pricing varies by lender and your circumstances at the time of application.
There is no single figure. What you need to put in depends on the total project cost, the brand, the security you can offer and the lender, and published figures are measured against different bases, so they often appear to contradict each other when they do not. Work out the whole spend, separate what a lender can fund, and treat what is left, plus any timing gaps, as the contribution your own deal needs.
Rarely, and not in the way the phrase suggests. Holding deposits, the franchise fee, lease or bank-guarantee requirements, builder deposits and opening cash can fall due before a lender can draw. Property equity can sometimes fund part of that gap, but that is still borrowed money secured against an asset, not a zero-contribution purchase.
Often you can get a conditional or indicative credit answer while the lease is still being finalised. Final lease or occupancy documents, landlord consent and site-specific information may remain conditions before settlement or drawdown, so an approval can exist while the money is not yet ready to use.
Potentially, but usually through different facilities rather than one loan. Equipment can be funded against identifiable assets, fit-out and the franchise fee may need business lending or more buyer contribution, and working capital is normally sized separately. What can actually be funded depends on the security, valuation, brand, lender and payment timing.
Accreditation is a lender's own prior assessment of a franchise system. It can matter because a lender that already understands the system may assess the brand faster and may take a settled position on structure rather than negotiating it case by case. It is not an approval of you: your own repayment capacity, contribution, credit conduct, security and the site still have to meet that lender's current policy.
Yes. An unaccredited brand can still be financed, but expect the lender to assess the franchise system itself, often as if it were a standalone small business. That usually means more weight on security and on your own contribution, and a less predictable timetable, so it is worth testing before you pay a deposit.
Yes. A new franchise site has no trading history of its own, so the lender leans more heavily on the franchise system, your relevant experience, your contribution, security, forecasts and working-capital plan. An established resale has actual site trading evidence, but it brings transfer consent, goodwill and purchase-price questions of its own.
There is no reliable single timeframe. An accredited system with a complete disclosure pack, borrower information, draft or final lease documents, fit-out pricing and equipment quotes can move faster than a file where those pieces arrive one at a time. The Franchising Code's 14-day consideration period is a legal decision window, not a lender turnaround promise.
The initial franchise fee is generally capital rather than an immediate deduction. The ATO says establishment or transfer fees can form part of the cost base of the franchise licence, while ongoing royalties, interest and some other running costs may be deductible depending on the payment and circumstances. Have your accountant apply the tax treatment to your transaction.
Not in the ordinary case where the SMSF would simply fund a franchise business that you or a related party will operate. SMSF investment and related-party rules are strict, so do not build the purchase structure around super without advice from an accountant or appropriately licensed superannuation adviser.
There is no general Australian Government loan that simply pays the purchase price of a franchise. Grants and programs are usually tied to a location, industry or activity after the business opens, so check the current business.gov.au grants and programs finder for the work your business will actually do rather than assuming the franchise purchase itself qualifies.
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