Franchise Financing Options in India

Banks and NBFCs offer business term loans that can fund a franchise. The interest rate depends on your credit history, any collateral, the lender's benchmark rate and the business. Compare offers on their total cost, including processing fees, not just the headline rate.

Lenders usually expect you to fund part of the project yourself — the "margin money". Ask each lender for its figure. CGTMSE, a government credit-guarantee scheme, lets lenders give micro and small enterprises loans without collateral; ask your bank whether your loan can be covered.

A franchise from an established brand may make lenders more comfortable, and some franchisors have arrangements with lenders. Neither replaces your own checks on the brand.

Mudra loans under the Pradhan Mantri Mudra Yojana are offered in four tiers: Shishu (up to ₹50,000), Kishor (above ₹50,000 to ₹5 lakh), Tarun (above ₹5 lakh to ₹10 lakh) and Tarun Plus (above ₹10 lakh to ₹20 lakh), the last only for borrowers who have taken and repaid a Tarun loan (PIB, Oct 2024 and Apr 2025). They're offered through banks, NBFCs and microfinance institutions.

PMEGP (the Prime Minister's Employment Generation Programme) gives a subsidy on the cost of new micro-enterprise projects, with different limits for manufacturing and service units. Check the current limits, and whether your activity qualifies, with your bank or the scheme's official portal.

Stand-Up India helps SC/ST and women entrepreneurs get bank loans of ₹10 lakh to ₹1 crore to set up a new (greenfield) enterprise (Stand-Up India portal). Some states run their own schemes for new enterprises — ask your bank or district industries centre.

NBFC and fintech loans: often faster to approve than bank loans, usually at a higher cost. Useful when you need speed or don't meet a bank's criteria — but compare the total cost carefully.

A partner or investor: someone who puts in capital for a share of profits. It lowers your risk but means sharing profits and decisions. Put the terms in a written agreement.

Family money: common in India. Treat it professionally — write down the amount, the repayment terms and how you'll report on the business.

Equipment leasing: leasing expensive equipment instead of buying it lowers the upfront cost. Lease rentals are usually a deductible business expense — confirm with your chartered accountant.

Keep your credit record clean in the months before you apply. Prepare a business plan with projections built from existing franchisees' real numbers. Have your documents ready: KYC, recent income-tax returns, bank statements, and property papers if you're offering collateral.

Approach more than one lender and compare offers. Rates and fees can be negotiated, especially for strong applications. Consider borrowing less than the maximum you're offered.

Our view: size the loan so the EMI is comfortably covered even if sales come in well below the brand's projection. The first months are when outlets are most likely to fall short.