Buying an Existing Franchise: How to Finance a Franchise Resale
Buying an existing franchise is treated as a business acquisition under SBA rules. With an established track record, existing customer base, and proven cash flow, resale financing can move faster than startup franchise loans — and seller notes can significantly reduce your cash at closing.
Key Differences from Startup Franchise Financing
Buying an existing franchise is treated as a business acquisition under SBA rules. The established track record and existing cash flow make resale financing different from startup franchise loans.
Established Track Record
The franchise has historical financial statements showing actual revenue, expenses, and profitability. Lenders can underwrite based on real performance, not projections.
Existing Customer Base
The franchise already has customers, brand recognition in the market, and established relationships with suppliers and vendors.
Real Estate in Place
The location is already built out, equipped, and operational. No construction delays, no permitting issues, no build-out surprises.
Cash Flow from Day One
Unlike a startup franchise that takes months to ramp up, a resale generates revenue immediately. You're buying an operating business, not building one.
Why Lenders Prefer Resales
Lenders can see exactly how the franchise has performed under the current owner. They can verify revenue through tax returns and bank statements. They can assess the location's viability based on actual results, not market studies. This reduces lender risk and often results in faster approval and better terms.
Result: Resale financing typically moves 2–4 weeks faster than startup franchise financing, and lenders may accept less liquid capital when the franchise has strong historical performance and demonstrated cash flow.
How SBA Values Goodwill in Franchise Resales
Goodwill is the intangible value of a going-concern business — the brand, customer relationships, location, and established operations. SBA lenders understand how to value and finance goodwill in franchise acquisitions.
What's Included in Goodwill
How Lenders Value It
Example: Franchise Resale Valuation
Seller Note Options to Reduce Cash at Closing
Seller notes are one of the most powerful tools in franchise resale financing. They reduce your cash requirement, signal seller confidence, and are explicitly allowed under SBA rules.
Reduces Your Cash Requirement
Seller note counts toward your equity injection, significantly reducing your out-of-pocket cash at closing. A $50K seller note can reduce your cash requirement by $50K.
Seller Confidence Signal
When the seller is willing to hold a note, it signals confidence in the franchise's future performance. Lenders view this favorably — the seller has skin in the game.
Full Standby Required
Under SBA rules, seller notes must be on full standby (no payments) for at least 2 years. After the standby period, you begin making payments to the seller.
Subordinated to SBA Loan
The seller note is subordinated to the SBA loan, meaning the SBA lender gets paid first. If the business fails, the seller is last in line to recover their note.
Will Sellers Agree to This?
Many sellers are willing to hold a note, especially if it helps close the deal. Sellers understand that most buyers need financing, and a seller note can make the difference between a successful sale and no sale at all.
Negotiation tip: Seller notes are most common when the seller is motivated to exit, when the franchise has strong cash flow (reducing seller risk), or when the buyer has strong qualifications but limited liquid capital. Your PeerSense advisor can help structure and negotiate seller note terms.
SBA Acquisition Loan Structure for Franchise Resales
SBA 7(a) loans are the most common financing tool for franchise resales. Here's how the structure works for business acquisitions.
Down Payment
Typical down payment for franchise resales. Can be reduced further with seller notes, partner equity, or gift funds.
Repayment Term
Fully amortizing, no balloon payment. Fixed or variable rate options available depending on lender.
Maximum Loan
SBA 7(a) maximum loan amount. Covers purchase price, working capital, and transaction costs.
What the Loan Covers
Timeline: Faster Than Startup Franchise Loans
Because the franchise has established financials and the lender can verify actual performance, resale financing typically moves 2–4 weeks faster than startup franchise loans.
Ready to Finance Your Franchise Resale?
PeerSense identifies the right capital source from our network of 500+ lenders, private equity firms, and institutional advisors — and makes the introduction. You get a straight assessment of where your deal fits and a direct connection to the source most likely to close it.
We'll connect you with lenders who understand franchise resale transactions and can structure your deal to maximize goodwill treatment.
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