Written By: Gouri Ghosh

If you are researching franchises to buy, you have probably heard this one: “Don’t worry,  bank loans are available.” Today, the availability of bank loans for franchises in India is one of the most popular sales points. As a first-time buyer, this sounds reassuring. It gives the impression that the business is secure, approved by the bank, and easily accessible. But the truth is, most people learn too late that loan availability and loan approval are not the same thing. Just because a loan is available does not mean that you will be approved for it. This is where most new buyers of franchises get confused & delayed. In this blog, we will discuss:

• The true state of bank loans for franchises in India in 2026
• Claims vs. what banks really do
• How banks assess loan applications for franchises
• How can one realistically plan for a bank loan for a franchise in India

If you are asking this question yourself, “How to finance a franchise?” then this guide is for you.

Typical Bank Funding Ratios in India

Common Claims vs Ground Reality

Let’s examine the most common claims that franchise buyers hear and decode what they actually mean in reality.

1. a) Claim: “100% Bank Loan Available”

Reality:

Banks in India never provide 100% of the franchise project cost

What banks actually fund:

• Banks fund 60-75% of the total project cost
• The remaining 25-40% needs to be invested by you as margin money

Margin money is mandatory:

• Banks expect to see your own investment in the business
• If you don’t have your own money, banks consider it a high-risk business

What banks usually do NOT fund:

• Franchise costs
• Brand or security deposits
• Interior cost overruns
• Initial business losses
• Rental security deposits

This is a very important fact check reality  for anyone planning to borrow from banks for franchises in India.

b) Claim: “Tie-ups with Leading Banks”

This sounds impressive, but the implication is often misleading.

What a bank “tie-up” actually means:

• The bank is aware of the franchise brand
• The bank has already seen similar loan proposals before

What it does NOT mean:

Guaranteed loan approval

Empanelment vs approval guarantee:

• Empanelment: The brand is known to the bank
• Approval guarantee: Rarely exists

What banks still assess:

• Your individual credit rating
• Your financial credentials
• Your bank loans repayment capacity

A bank tie-up does not lower risk for new franchise buyers.

c) Claim: “Easy Loan Approval”

The fact is, business loans are never easy.

Actual loan approval process and time:

• Franchise loan approval takes 4 to 10 weeks on an average
• Sometimes even longer

Documents banks normally require:

• Personal financial documents
• Business plan and projections
• Franchise agreement
• Location and rental agreement documents
• Detailed cost structure

Why banks treat franchise loans like any other business loan:

• Banks do not automatically assume success because it is a franchise
• They assess it like any other MSME business loan

Common reasons for loan rejection:

• Low credit rating
• Insufficient margin money
• Poor or impractical project report
• New or unproven franchise brand

d) This claim requires clarity.

What help usually means:

• Sharing cost estimates
• Providing brand details
• Giving basic guidance

What help usually does NOT include:

• Bank follow-ups
• Loan negotiations
• Handling bank objections

In most cases, you handle the loan process yourself.

e) Claim: “Our Other Franchisees Got Bank Loans.”

This claim may be true, but it does not necessarily mean anything.

Why past approvals don’t guarantee yours:

• Loan approval depends on your profile
• City and location matter
• Market conditions change
• Timing plays a role

Always ask for proof:

• Do not rely only on verbal claims
• Ask for written or verifiable data

Understanding these points will help you understand the actual scenario of bank loans for franchises in India.

Bank Funding Expectations vs Reality Table

How Banks in India Actually Assess Franchise Loan Applications

Here is what banks actually assess before sanctioning loans for franchises:

• Credit score and financial history: A clean credit history indicates financial discipline and increases the chances of loan approval.
• Existing loans and EMI burden: Banks check the amount of existing debt and whether you can service another EMI.
• Margin money and source of funds: You need to invest your own capital, and banks verify the source of your funds.
• Business location and city category: Demand, foot traffic, and the city's potential are major factors in risk assessment.
• Rental agreement terms: Lease term, lock-in period, and rental value impact business stability.

Franchise brand performance: 

• Established brands are less risky to banks
• New or untested brands are under more scrutiny
• Cash flow projections and break-even point: Banks analyze whether the business can generate sufficient cash to repay the loan.
• Collateral and guarantor availability: Security provides greater comfort to banks, especially for larger loans.

All these parameters actually constitute the real backbone of bank loans for franchises in India, which is much more than what is generally advertised.

Types of Bank Funding Available for Franchise Buyers

It is important to understand the various types of funding available while planning for franchise finance in India. Banks do not provide a single type of loan for franchises. Rather, loans are designed based on the size of the business, risk, and the buyer. Below are the various types of bank funding for franchises in India:

a) MSME Loans

• Ideal for small to mid-sized franchises
• Typically provided with a medium repayment term
• Most popular among first-time franchise buyers

b) Business Term Loans

• For franchise setup, interior, equipment, and fixed assets
• Repayment is designed over several years through EMIs

c) CGTMSE Loans

• Secured through a government credit guarantee scheme
• Does not remove business and repayment risk
• Banks still demand robust financials and feasible projections

d) Working Capital Loans

• For daily business operations such as inventory and payroll
• Can be provided as Cash Credit (CC) or Overdraft (OD)
• Not the same as term loans for initial setup expenses

e) Composite Loans

• Combines initial setup loans and working capital loans in one loan
• Helpful for new franchises during the initial setup period

f) Personal Contribution + Partial Bank Funding

• The buyer invests a portion of his own capital
• Bank funds the rest
• This is the most common and practical funding structure in reality

Understanding these options will help the franchise buyer plan in a realistic manner and avoid surprises while arranging bank funding for franchises in India.

Who Can Apply for Franchise Bank Funding

In India, banks are ready to provide funding for franchises to various kinds of people. You do not have to be an experienced businessman to apply for bank funding. Most banks accept applications from:

• Salaried professionals who want to start a franchise business
• Businessmen want to expand their business through a franchise
• First-time businessmen with a clear and practical plan

More than experience, banks look at financial stability. When banks examine an application, they normally check for:

• Financial stability and regular income
• Basic net worth to invest your own money
• Adequate age to repay the loan comfortably
• Relevant experience, which is always a plus but not mandatory

If the above criteria are met, your prospects of getting bank funding for a franchise in India will improve significantly.

How to Apply for a Franchise Loan

Bank loan application in India can be made simpler by following a step-by-step procedure. Here’s a simplified guide to help you understand how to finance a franchise:

• Finalize the franchise brand: Select the franchise only after understanding the business model, investment, and support structure of the franchise.
• Prepare a detailed project report: The project report should contain information about investment, projected revenue, expenses, and the break-even period.
• Arrange the margin money: Keep your margin money ready, as the bank will not provide 100% loan for the project cost.
• Apply to suitable banks: Apply to banks that are actively involved in lending to MSME and franchise businesses.
• Submit required documents: Submit personal, financial, and business-related documents as required by the bank.
• Respond to bank queries: The bank may ask for clarifications or additional information before final approval of the loan.

By following these steps, you can easily get bank loans for a franchise in India without any delay.

What Franchise Buyers Should Ask Before Trusting Funding Claims

Use this checklist:

• Which banks funded your franchisees?
• How many loans approved in the last 12 months?
• Promised vs approved loan amount?
• Written confirmation available?
• Post-application support?
• What if the loan is approved for less?

Smart Tips to Increase Your Chances of Securing a Franchise Loan from Banks

Securing a loan from banks for franchises becomes easier if you plan and prepare in the right manner. Small changes in planning and finances can make a huge difference in securing a loan. Here are some smart tips to follow:

• Draw up a realistic project report
  •  Draw up a project report with realistic figures for cost, sales, and expenses. Do not be too optimistic about profits.
• Improve your credit score before applying
  •  Pay off dues, pay EMIs on time, and remove errors in your credit report.
• Reduce your existing liabilities
  •  Reducing existing liabilities makes you a better candidate for repayment in the bank’s eyes.
• Select successful franchises
  •  Select successful franchises, which are considered safer and receive better responses from banks.
• Be practical about your expectations
  •  Be prepared for a partial loan and have your own share of the capital ready in advance.
• Have a backup plan for funding
•  Always have a plan B in case the bank sanctions less than what you expected.

Reality Check: Should Funding Availability Decide Your Franchise Choice?

• Do not select a franchise solely based on the availability of funds
• Keep in mind that the availability of bank funds for franchises in India does not necessarily translate to success
• Prioritize unit economics, return on investment, and break-even points before considering loans
• Recognize that the availability of funds cannot compensate for a poor business model
• Do not take large loans solely because banks are ready to fund
• Structure loans thoughtfully to avoid cash flow issues
• Select a robust franchise first, and then determine the financing option for a franchise

Typical Loan Approval Timeline (Expectation vs Reality)

Conclusion

The availability of bank funds for franchises in India is true, but it is often misconstrued and exaggerated. Many franchises advertise the availability of funds to entice sales, while the approval is contingent on your financial credentials, contribution, and business viability.

As a first-time franchise purchaser, always remember this: banks lend money to people and good businesses, not to marketing promises. Do your homework, check the unit economics, and work out your own investment before resorting to loans. By making the right choice in the first place and then structuring your loans correctly, you put yourself in a much better position to create a profitable and sustainable business.

Disclaimer: The brands mentioned in this blog are the recommendations provided by the author. FranchiseBAZAR does not claim to work with these brands / represent them / or are associated with them in any manner. Investors and prospective franchisees are to do their own due diligence before investing in any franchise business at their own risk and discretion. FranchiseBAZAR or its Directors disclaim any liability or risks arising out of any transactions that may take place due to the information provided in this blog.