Personal Finance / Business / Growth

How to Get Liquid Capital for a Franchise: Complete guide

If you are reading this article, the chances are you are running low with your capital and you need funding to boost your business. If so, then all you need to do is go through this article, and you will get all the insights and information regarding liquid capital and How to Get Liquid Capital for a Franchise if you have one or are thinking of starting one.

Stay tuned!

Honestly speaking, you may find funding solutions available for obtaining liquid capital to finance a franchise, including banks, SBA lenders, online lenders, franchisors, and even friends and family.


Franchising opportunities require prospective franchisees to meet financial requirements, including net worth and liquid capital. Finding ways to obtain liquid capital, whether through bank loans, private investors, or other financing options, is crucial for investing in popular franchise brands like McDonald’s, Subway, and more. Understanding the importance of liquid capital and exploring strategies to secure it are essential steps for aspiring franchise owners looking to build successful business ventures.

how to get liquid capital for franchise
liquid capital franchise

What is liquid capital for a franchise?

Liquid capital refers to cash and assets that can be easily converted into cash within a short period. In the franchising world, liquid capital plays a vital role in demonstrating the financial stability of a potential franchisee. Unlike net worth, which includes all assets, liquid capital focuses on funds that can be readily utilized for investment purposes.

Why Liquid Capital is Crucial for Franchise Success?

In nearly all cases, franchisors require prospective franchisees to have a minimum amount of liquid capital before entering into a franchise agreement. This requirement ensures that franchisees have the financial resources to cover initial investment costs, operational expenses, and unforeseen challenges that may arise while running a franchise business.

why is liquid capital for a franchise

why is liquid capital for a franchise?

Having sufficient liquid capital not only instills confidence in the franchisor but also provides the franchisee with a solid financial foundation to navigate the ups and downs of the business. It enables quick decision-making, timely payment of obligations, and the ability to seize opportunities for growth and expansion. Ultimately, the presence of liquid capital is a key indicator of the franchisee’s preparedness and commitment to the success of the franchise venture.

The Essence of Liquid Capital in Franchising

Franchising opportunities hold a promise of growth and success for aspiring entrepreneurs, but one crucial factor that determines the feasibility of investing in a franchise is the availability of liquid capital. Understanding the significance of liquid capital in the context of franchising is essential for those looking to embark on this business journey.

Read further: CNO investing for beginners: Complete Guide

How to get liquid capital for a franchise

When considering investing in a franchise, having liquid capital on hand is essential. Liquid capital refers to the cash and assets that can easily be converted into cash to support your franchise venture. In nearly all cases, franchisors require potential franchisees to have a certain amount of liquid capital available. Traditional financing options like mortgages or loans secured by non-liquid assets (such as cars or houses) do not apply.

how to get liquid capital for franchise

How to get liquid capital forfranchise

1. Personal Savings:

One of the most common ways to acquire liquid capital for a franchise is through personal savings. This method involves setting aside funds from your income over time to build up the necessary capital for your investment. By consistently saving a portion of your earnings, you can accumulate the funds required to meet the financial requirements of the franchisor.

2. Bank Loans:

For aspiring franchisees who may not have sufficient liquid capital saved up, bank loans can be a viable option. Banks offer various loan products specifically designed for individuals looking to invest in a franchise. These loans typically require a solid business plan, good credit history, and collateral to secure the financing. Navigating the loan application process and meeting the bank’s requirements is crucial for securing the necessary liquid capital.

3. Private Investors and Venture Capital

Another avenue for acquiring liquid capital for a franchise is through private investors and venture capital firms. These individuals and organizations provide funding in exchange for equity in the business or a return on their investment. Establishing relationships with potential investors, pitching your franchise opportunity, and negotiating terms are key steps in securing funding through this method.

4. Government Grants and Subsidies

In some cases, aspiring franchise owners may be eligible for government grants and subsidies to support their investment. These programs are often designed to encourage entrepreneurship, job creation, and economic development in certain industries or regions. Researching available grants, meeting eligibility criteria, and submitting a compelling application are essential for accessing government funding for your franchise venture.

5. Creative Financing Strategies

For individuals who are innovative and resourceful, exploring creative financing strategies can help secure the necessary liquid capital for a franchise. This may involve negotiating payment terms with suppliers, leveraging existing assets for financing, or partnering with other businesses to share resources and costs. By thinking outside the box and being proactive in seeking financing solutions, aspiring franchise owners can overcome financial obstacles and kickstart their business ventures.

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Requirements to Get Liquid Capital for a Franchise

Before you begin your search for the perfect franchise loan, make sure you meet all requirements and have all necessary documents in order. Some of the required documents include:

  • Completed application for an SBA loan (Form 1919)
  • Notarized copy of the franchise agreement
  • Personal history statement
  • Personal and commercial financial statements
  • Business License
  • Previous credit records
  • Tax returns
  • Resume
  • Copy of the business lease

Steps to Get Liquid Capital for a Franchise

To qualify for a line of credit for your franchise, you should do the following:

  • Identify the type of financing you need
  • Review your company’s qualifications
  • Compare and contrast lenders
  • Submit your inquiry

These are just simple dummy steps to follow. You may go ahead and research it to get a more in-depth analysis of the process.

Best Sources of Liquid Capital for a Franchise

liquid capital franchise

liquid capital franchise

1. Franchise startup loans

These are a funding option that allows you to access money based on the value of your investments without having to liquidate them. This method is a strategic way to leverage your long-term holdings, and the approval and disbursement process typically takes less than 10 days from start to finish.

Franchises have the opportunity to secure business lines of credit through companies such as Fundbox. These credit lines can be obtained in amounts of up to $150,000 and can be used for various purposes, including capital investments, payroll, employee benefits, purchasing supplies or materials, and more.

2. SBA franchise loans

Banks and credit unions are among the participating lending institutions that provide SBA loans, which are partially guaranteed by the US Small Business Administration. These loans, including SBA 7(a) and SBA CDC/504 loans, are commonly utilized for financing franchises. SBA 7(a) loans are recognized for their competitive rates and manageable repayment terms, offering lines of credit up to $5 million. It’s important to mention that franchisees can utilize SBA 7(a) loans for various purposes. However, your franchise must be listed in the SBA Franchise Directory to qualify for these loans.

3. Franchise bank loans

Financial institutions, such as banks and credit unions offer a variety of franchise financing options. While these funds typically have competitive interest rates and repayment terms, they also come with stringent eligibility criteria. For instance, TAB Bank offers enterprise term loans up to $200,000 with repayment terms spanning from 12 to 60 months.

4. Rollovers as Business Startups, or ROBS

Many franchisees opt to use a ROBS, a method that often involves taking funds from your 401(k) or other retirement accounts to invest in your business, often with the help of legal counsel or a ROBS provider. However, ROBS can be risky and may result in substantial fees, so it is important to carefully weigh your options before choosing this route.

5. Friends, family, and fools (FFF)

If you have a family member or friend who is willing to help support your business venture, you may consider asking for a loan to fund your franchise.

An interesting read for new startup founders : The dummies guide to starting your own business

Choosing the Right Franchise and Preparing for Investment

When considering investing in a franchise, it’s essential to choose the right one that aligns with your goals, interests, and financial capabilities. Conduct thorough research on various franchise opportunities, read through disclosure documents, and assess the potential profitability of each option. Look for a franchise that has a proven track record of success and offers strong support to its franchisees.

how to get liquid capital for franchise
how to get liquid capital for franchise

Evaluating Franchise Opportunities

Evaluate franchise opportunities based on factors such as brand recognition, market demand, competition, and growth potential. Consider the initial investment required, ongoing fees, and projected revenue to determine the financial viability of each franchise option. Speak with current franchisees, attend discovery days, and seek guidance from industry experts to gain insights into the franchise’s operations and performance.

Understanding Franchise Financial Requirements

Franchise financial requirements typically include both net worth and liquid capital. Net worth refers to the total value of your assets minus liabilities, while liquid capital represents the cash and assets that can be converted into cash quickly. Franchisors use these financial metrics to assess their ability to invest in the franchise and cover operating expenses. Understanding these requirements is crucial in determining your eligibility to become a franchisee.

The Role of a Supportive Franchisor

A supportive franchisor plays a vital role in the success of franchisees. Look for a franchisor that offers comprehensive training, ongoing support, and marketing assistance. A strong franchisor will guide you through the process of setting up and operating the franchise, help you navigate challenges, and provide resources to help you grow your business. Establishing a positive relationship with your franchisor can lead to long-term success as a franchise owner.

Also Read: What’s the biggest challenge for most businesses when going online?


When considering investing in a franchise, understanding the concept of liquid capital is crucial. Liquid capital represents the cash and assets that can be easily converted into cash, providing the necessary funds to kickstart your franchise venture. By meeting the financial requirements set by franchisors, individuals can take advantage of the lucrative opportunities offered by popular brands in various industries.

Summarizing Key Takeaways

In summary, liquid capital for a franchise is the accessible cash and assets needed to invest in a franchise opportunity. Prospective franchise owners must have the necessary liquid capital to meet the financial requirements set by franchisors. Strategies such as exploring financing options, conducting thorough research, and choosing a supportive franchisor can help aspiring franchise owners overcome financial obstacles.

Next Steps for Aspiring Franchise Owners

For individuals looking to invest in a franchise but lacking the required liquid capital, exploring financing options such as bank loans or private investors is a viable solution. Conducting thorough research on franchise brands, understanding profitability and costs, and seeking guidance from established franchisors are essential steps in the process. By taking the necessary steps and leveraging available resources, aspiring franchise owners can overcome financial barriers and embark on a successful franchise ownership journey.


  1. FranFinders
  2. P3 Cost Analysts
  3. ProfitableVenture

What is a liquid resource?

Liquid resources refer to assets that can be easily converted into cash within 20 days. Common examples of liquid resources include annuities, bonds, and cash.

What is liquid capital for a franchise?

Liquid capital for a franchise refers to the cash or assets readily available for investment in the franchise business. It includes cash, savings, stocks, bonds, and other easily convertible assets.

How do you earn liquid capital?

Liquid capital is typically earned through savings, investments, business profits, or the sale of assets. It can also be generated by accessing lines of credit or securing loans.

What are the liquidity requirements for a franchise?

Liquidity requirements for a franchise vary depending on the franchisor’s policies and the specific franchise opportunity. Franchisors often require a minimum amount of liquid capital to ensure franchisees have sufficient funds to operate the business successfully.

What are the capital requirements for a franchise?

Capital requirements for a franchise encompass both liquid capital and non-liquid assets such as equipment, real estate, and working capital. Franchisors may specify minimum capital requirements for potential franchisees.

Which assets are most liquid?

Cash and cash equivalents such as savings accounts, money market funds, and short-term investments are the most liquid assets as they can be quickly converted into cash without significant loss of value.

What is the formula for liquid assets?

Liquid assets are calculated by adding cash and cash equivalents, marketable securities, and accounts receivable, and subtracting current liabilities.

Can a loan be liquid capital?

While a loan provides access to funds, it is not considered liquid capital as it represents debt rather than assets readily available for investment. However, the proceeds from a loan can contribute to a franchisee’s overall capitalization.

What is the formula for the liquidity of a company?

The liquidity of a company is often measured using the current ratio, which is calculated by dividing current assets by current liabilities. This ratio indicates a company’s ability to meet short-term financial obligations using its liquid assets.

How do you maintain sufficient liquid capital for a franchise?

Maintaining sufficient liquid capital for a franchise involves careful financial planning, regular monitoring of cash flow, and prudent management of expenses. Franchisees should prioritize building and preserving liquid assets to ensure financial stability and flexibility.

Hi, I am Tahir, a young entrepreneur working in the finance sector for more than 5 years. I am ambitious to add remarkable value to my country's economy.

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