How to Get a Bank Loan for Your Franchise Business in India?

Starting a franchise can be a great way to become an entrepreneur. This is because you are given the opportunity to run a business using an established brand. You could also be given support including training, marketing and assistance with the day-to-day running of the business.

However, starting a franchise can be costly. You may need to pay a fee to the franchise company, pay to rent a shop, purchase equipment and employ staff. You may also have to pay for initial stock as well as the running costs for the first few months.

A bank loan can help to cover some of these costs but the bank will want to ensure you have a good financial position and can repay the loan. They will want to know if you have a solid business plan.

Within India you can apply for a loan for your franchise by putting together a project report, ensuring you have a deposit and identifying suitable loan options. You will also need to submit the necessary documents.

In this guide we have set out simple steps to follow to get a loan for your franchise business. We have also included information on the different loan options available, government schemes, eligibility criteria, documents required, costs and common mistakes.

Can You Get a Bank Loan for a Franchise in India?

Yes, you can apply for a loan from a bank for your franchise in India. You may be offered a loan from the bank or other eligible lenders depending on your proposal and whether they offer suitable business loans or MSME loans.

Having an established and famous franchise brand doesn’t guarantee you’ll be approved. The bank will want to ensure your business will make enough money to repay the loan.

Depending on what type of franchise you want to open, whether it be a food outlet, coaching centre, salon, laundry or retail business, you will need to consider how much you will have to invest based on the brand, location, shop size and business model.

Calculate the total investment required:

Franchise fee and any other costs to pay to your franchisor.

• Shop rental and deposit.
• Fitting out and furnishings.
• Equipment and machinery.
• Initial stock and supplies.
• Staff salaries and training costs.
• Licences, insurance etc.
• Working capital.

Do not just consider the franchise fee. Your business may require additional funds to get started and begin making enough money to cover costs.

You can read our guide on financing options for franchising in India https://www.franchisebazar.com/blog/can-i-get-financing-options-for-buying-a-franchise-in-india-

What Types of Loans are Available for Franchise Businesses?

Depending on how much you need and what you need the loan for, you may require different types of loans.

Business Term Loan

A business term loan is a loan you pay back over an agreed period.

This can help to cover some of your eligible fitting out costs, furnishing, equipment and other eligible business costs.

Before agreeing to the loan, ensure you are aware of the interest rate, how long you will be paying back the loan, any fees and the security required. The bank will also want to know what they are covering the costs of.

MSME Business Loan

If your franchise is eligible then you may qualify for MSME funding.

This can help to cover some of your eligible fitting out and running costs. The lender will want to know about your business activity, how much your project will cost, how much you have invested and if you can repay.

Just being registered as an MSME doesn’t guarantee you’ll get the loan.

Working Capital Loan

Working capital is the money you need to run your business.

This can help you purchase stock, pay suppliers, wages and other eligible running costs.

Some lenders offer working capital via cash credit or overdraft. Speak to the bank to find out what will be suitable for your business.

Equipment Loan

Some franchises require expensive equipment such as laundries, food outlets and diagnostic centres.

This can help you cover the costs of your eligible machinery and equipment. The lender may want to know what quotations you have received from your suppliers and what equipment you are looking to buy.

Make sure you don’t assume you can use one loan to cover all your costs. Ask the lender what they can be used for.

What Government Loan Schemes Can I Look Into as a Franchise Owner?

Government loans are helpful for qualifying small businesses. You must make sure that the franchise you intend to carry out fits within the criteria.

Pradhan Mantri MUDRA Yojana (PMMY)

Helps qualify micro enterprises. This can help with eligible term loans and working capital.

There are 4 categories of loans available:

Category Loan Amount

• Shishu Up to ₹50,000
• Kishore More than ₹50,000 up to ₹5 Lakh
• Tarun More than ₹5 Lakh up to ₹10 Lakh
• Tarun Plus More than ₹10 Lakh up to ₹20 Lakh

Source:https://financialservices.gov.in/pradhan-mantri-mudra-yojana-pmmy

Tarun Plus is for eligible entrepreneurs who have successfully paid back a loan from the Tarun category. It isn’t for everyone wanting to take out their first loan.

This loan doesn’t require any security, but the lender will want to know about your application and if you can repay.

If your franchise business is eligible then it may be considered. Not all franchise brands and business models will be eligible.

Speak to an eligible bank or lender to confirm if you are eligible before paying a non-refundable franchise fee.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

This helps with eligible credit facilities by providing a guarantee.

This isn’t like a bank that would provide you with a franchise loan. They provide guarantee support to eligible lenders.

Speak to your bank to see if your business and loan are eligible under current criteria. Just because there is a guarantee, you won’t automatically get approval.

Source: https://www.cgtmse.in/Home/VS/95

JanSamarth Portal

You can also look into this portal to find out about eligible credit-linked government schemes.

Ensure you are aware of the current criteria, documents required and what you can use the funds for. Speak to the relevant lender to confirm.

What are the Eligibility Criteria for a Franchise Business Loan?

Each lender will have their own criteria however most will look at a few key points.

Credit History – This shows how you have managed your loans and credit payments in the past. Ensure you check your credit report and correct any issues. If you have any overdue payments, try to resolve them.

Deposit – The bank may want you to invest some of the total project cost. This will vary depending on the lender and loan type.

Business Plan – Ensure you have a business plan outlining what you will sell, who your customers will be and how you will make money.

Ability to repay – The lender will want to know if your expected cashflow can support the loan repayments.

Franchise Agreement – The bank may want to know about the franchise brand, fee, royalties and terms.

Location – How much you pay for the rental, demand for customers, competition and local factors can impact your business.

Current Debt – Any current EMIs or other financial commitments can impact how much you can borrow.

Not everyone will need to have an existing business to apply. New entrepreneurs can apply but may need to have a detailed project report as they won’t have any sales history.

There isn’t a specific credit score or income level that will guarantee you approval from all lenders.

What Documents Will I Need for my Franchise Loan?

Ensure you have all the documents ready. This will vary depending on the lender and your business.

Common documents include:

• PAN, Proof of Identity and Address.
• Bank Statements.
• Income Tax Returns (if applicable).
• Salary/Income proof
• Franchise Agreement/Letter of intent
• Quotes for franchise and fit-out.
• Business Plan & Project report.
• Profit and loss forecast.
• Cash flow and repayment forecast.
• Shop lease agreement/rental agreement
• Proof of business registration (if applicable)
• Udyam Registration & GST (if applicable)
• Quotes for equipment and appropriate licensing.

New franchises may require more in-depth financial forecasts. If you are purchasing an existing business, then historical financials will be required.

Check the official bank documentation list.

How To Get A Bank Loan For Your Franchise Business (6 Steps)

Step 1: Work out how much you need to invest

List out all the costs you expect. This will include:

• Franchise Fee
• Interior design
• Equipment
• Deposit for rent
• Stock
• Staff costs
• Working Capital

Leave some room for unexpected costs. This will help you avoid underfunding.

Step 2: Research the brand

Look into the franchisor.

Check the franchise agreement. Are there any royalty or marketing costs? Who will provide training? Do they provide any services within the initial fee?

Speak to current franchise owners. Find out what the real costs are. What are the sales like? What issues have they had running the business? What support do they receive from the brand?

Look at franchise opportunities on FranchiseBazar. Make sure you verify any statements, costs and contracts.

Step 3: Write a clear business plan

Within your business plan, you should explain:

• What you will be selling.
• Your target market.
• Why you have chosen the location.
• How much money you need.
• How much you will invest.
• How much you want to borrow.
• Your estimated monthly sales and costs.
• How you will repay the loan.

Ensure your estimates are realistic and not just based on the best-case scenario the franchisor has provided.

Step 4: Look into the right lenders

Speak to your bank and find out if they provide any business or MSME loans.

Find out what interest rates, fees, repayment terms and security they require. Can they provide a government backed loan?

Look at the overall cost.

Step 5: Apply

Fill in the application form and include any documents.

State how you will use the funds and ensure the amount you are requesting fits with your project report.

Be honest with the bank and provide any extra documents they may require.

Step 6: Review the loan offer

If you are offered a loan, review the sanction letter.

Check how much you’re borrowing, interest rate, fees, repayment terms, security and how the loan will be disbursed.

If they are offering you less than you requested, look back at your business plan. Don’t take on more debt unless you’re sure the business can afford it.

How much can I borrow for a franchise?

There isn’t a set amount you can borrow for a franchise. It will depend on your project costs, your eligibility and the lender.

Example: (Note: These numbers are just examples)

In this example, you can invest ₹5 Lakh.

You will need to borrow ₹10 Lakh.

However, you will need to check with your lender to see if you’re eligible for that amount. They will check whether the costs are eligible, whether you’re providing enough of your own investment and whether the business can repay.

How can I ensure the franchise can repay?

A good franchise plan should outline how the business will cover its costs and repay the loan.

Example:

Let’s say you expect to make ₹3 Lakh per month in sales. Your monthly costs (rent, salaries, stock, royalties, etc.) will be ₹2.5 Lakh.

This means you’ll have ₹50,000 to cover any costs before repaying your loan, taxes, etc.

Note: This is not profit or free cash. This could be less than you anticipated.

Try using your cash flow estimates to see how the business will cope in different scenarios. What if your sales drop by 20%? Will you still be able to cover your costs (rent, salaries and loan EMI)?

This simple calculation can help you understand the risks involved.

What Is the Interest Rate on a Franchise Business Loan?

There isn’t a set interest rate.

It may depend on your credit profile, lender, loan product, security and your financial situation.

Ask your lender for a written quote. Ensure you know the interest rate, fees, any other charges, repayment terms and overall cost.

Ask if it is a fixed or variable rate.

A lower EMI may not always mean it is cheaper. If the repayment term is longer then you may pay more in interest.

Can You Get a Franchise Loan Without security?

Yes, there may be some eligible loans you can get without any security.

For example, under the MUDRA scheme, there is no requirement for security. However, other options may not follow the same rules.

Note: Even though there is no security required, the lender will still check your credit history, business plan and ability to repay.

Ask your bank if your franchise is eligible and read the terms carefully.

Common Mistakes to Avoid

Don’t make these mistakes:

1. Assume it will be approved because it’s a well-known brand.
2. Only calculate the franchise fee.
3. Don’t include working capital or unexpected costs.
4. Use unrealistic sales figures.
5. Don’t check your credit report.
6. Assume the bank will fund the whole project.
7. Pay a non-refundable fee without checking the terms.
8. Believe you will get guaranteed approval.

A franchise can give you a business model and brand support but cannot guarantee sales or profits.

FAQs

1. Can I get a bank loan to start a franchise in India?

Yes, you can apply for the right business loan or eligible government backed credit. This will depend on your financial profile, project and lender rules.

2. Which banks offer loans for franchise businesses?

The banks may offer franchise opportunities within their business or MSME loan products. Speak to individual lenders.

3. Can I use a MUDRA loan?

Possibly, depending on your business activity and funding requirements. Speak to an eligible lender to check if you’re eligible.

4. Can I get a loan without any security?

Yes, some eligible options don’t require security. However, the lender will still check your application.

5. How much do I need to invest?

It depends on the lender, your project costs and eligible costs.

6. What credit score do I need?

There isn’t a set credit score. However, having a good credit history can help. Lenders will also check your income, debts and business plan.

7. How long will the loan take to be approved?

This will depend on the lender and your application. Ask the bank how long they expect it to take. Don’t pay any non-refundable fees based on an expected approval date.

8. What if my loan is declined?

Ask the lender why. Check your credit report, project costs and financial forecasts. Make the necessary changes and reapply.

Final Thoughts

Getting a bank loan for your franchise business in India requires careful planning.

Work out how much you need to invest. Research the brand. Create a realistic business plan. Compare the right lenders.

Look into government-backed loans from official sources. Check with your lender what the rules are. Read the loan terms.

The best loan for you will not always be the largest loan. It will be the loan your business can repay without putting unnecessary pressure on your finances.

Written By: Gouri Ghosh, Franchisebazar Editorial Team — Updated October 2026

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.