How to fund a franchise (and not go broke)

Hey everybody,

Picture this: You found the perfect franchise. You're excited. You're ready to move forward.

Then someone asks: "So... how are you paying for this?"

Suddenly you're spiraling through a dozen Reddit threads about SBA loans, ROBS, HELOCs, and whether your uncle's "guy who knows a guy" can help.

Here's the truth: most people overthink franchise funding.

There are really only two paths that matter for most buyers: SBA loans and ROBS (Rollover for Business Startups).

Everything else is a footnote.

So let's break down both options, compare them head-to-head, and figure out which one makes sense for you.

→ Related: How much does a good franchise cost?

The workhorse: SBA Loans

Banks don’t love lending to unproven businesses. That’s why the SBA loan program exists.

An SBA loan is a loan backed by the Small Business Administration. A bank lends you money, the government guarantees 75% of it, and the bank takes on the remaining 25% of exposure.

There are nuances, but the typical setup looks like: You put down 10–30% (usually 15–20%), the bank finances the rest, and you repay over 10 years with interest.

The pros:

• Access to serious capital (up to $5.5M)

• Long repayment terms that help manage cash flow

• Builds business credit

• Keeps your retirement savings untouched

The cons:

• Strict requirements (credit score over 680, collateral, liquidity cushion)

• Lengthy approval process (60–90 days, sometimes longer)

• Tons of paperwork

• Personal guarantee required (your assets are on the line)

• Fixed monthly payments, regardless of how the business performs

That last one is key. When you commit to a fixed payment, you're giving up autonomy over your cash flow. Even in a tough month, that payment is due.

So what’s the alternative?

The retirement play: ROBS

ROBS stands for Rollover for Business Startups. 

It lets you use funds from a 401(k) or traditional IRA to invest in your business — without early withdrawal penalties or triggering a taxable event.

You're essentially creating a C-Corp within your retirement plan, and that C-Corp buys stock in your business. Instead of buying Apple or Tesla, you're buying shares in your own company.

It’s a great tool. But it’s complicated. Call the professionals!

The pros:

• Zero debt, zero interest payments

• Much faster process than SBA (no bank approval needed)

• No credit or collateral requirements

• Total flexibility — no fixed monthly obligations

The cons:

• You're risking your retirement savings

• Limited by your account balance (most people don't have $5.5M sitting in their 401(k))

• Strict compliance requirements (you need a pro handling this)

• Ongoing administrative costs

• Tax implications (C-Corps have different rules)

The alternatives

SBA and ROBS are far and away the big two. But here are a few alternatives worth knowing about:

• HELOC (Home Equity Line of Credit). If most of your wealth is tied up in your house, you can borrow against it.
  

• SBLOC (Securities-Backed Line of Credit). Like a HELOC, but against your stock portfolio instead of your house. Riskier, since stocks are more volatile than real estate.
  

• ABL (Asset-Backed Loan). If you're buying a franchise where most of the investment goes toward equipment (like a waste management business where 70% of your cost is the truck), you can get better loan terms by using that equipment as collateral.
  

• Cold hard cash. My favorite option. If you have the cash, you can sleep like a baby. 

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These are your options. So which one should you pick?

I get asked this constantly. Some people are debt-phobic. Other people can’t bear to touch their retirement. 

The truth: there’s no right answer. 

It comes down to 1) what sets up your business to succeed, and 2) what lets you sleep at night.

I’m happy to help you weigh your options — but it’s a decision only you can make.

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Questions? Hit reply and let me know.

And if figuring this is your roadblock to buying, we should hop on a call. I walk people through this decision every week. No charge, no pressure. Grab a time here.

Thanks for reading,

Connor

P.S. Also: I made this into a video a little while ago. Check it out here!

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