2025 Trends in Franchise Lending and What They Mean for You

The world of franchise lending is not static – it evolves with economic conditions, regulatory changes, and industry trends. As we step into 2025, prospective and current franchise owners need to be aware of the latest trends in financing. Understanding these trends can help you seize opportunities and navigate challenges when seeking capital for your franchise ventures. From interest rate shifts to innovative lending platforms, here are the key 2025 franchise lending trends and what they mean for you as a borrower.

Trend 1: Easing Interest Rates Provide Relief

After a period of rising interest rates in the early 2020s, there’s a silver lining on the horizon. Economists and financial analysts are forecasting a stabilization – and in some scenarios, a slight decrease – in benchmark interest rates as we go through 2025. Easing inflation and favorable economic conditions are setting the stage for lower interest rates, which can significantly benefit franchise borrowers .

For franchisees, this trend means the cost of borrowing could decrease. If you held off on financing due to high rates, 2025 might be the year to re-engage. Lower interest rates reduce your monthly loan payments and the overall cost of capital, improving your franchise’s cash flow. For example, an SBA 7(a) loan that might have carried a rate of around 10.5% last year could come down closer to 9% if the Prime rate drops – it may not sound huge, but on a large loan that difference saves you thousands over the life of the loan.

What You Should Do: Keep an eye on Federal Reserve announcements and market rates. If you have existing loans at high fixed rates, consider talking to lenders about refinancing options should rates drop to a more favorable level. If you’re planning to borrow, perhaps opt for a slightly shorter-term loan or one with no prepayment penalty, so you have flexibility to refinance or pay off early if rates dip further. Also, even with easing rates, maintain a strong credit profile – the best rates will go to the most creditworthy applicants.

Trend 2: SBA Loan Program Updates Favor Borrowers

The U.S. Small Business Administration’s loan programs (7(a), 504, etc.) remain a cornerstone of franchise financing. In 2025, the SBA has continued efforts to make loans more accessible and affordable, especially for smaller loans. Notably, for the second year in a row, the SBA is waiving upfront guaranty fees for 7(a) loans $1,000,000 or less . This waiver, in effect through fiscal year 2025, means if you take an SBA loan under that threshold, you save on fees that would normally be added to your loan amount.

Moreover, the SBA rolled out its Working Capital SBA loan pilot (WCP) which also features no upfront fees for loans up to $1M and even no annual service fees for loans $500k or less , aimed at helping businesses with operational funding. These moves signal an SBA push to encourage small-dollar lending and support entrepreneurs who might have been deterred by fees in the past.

Another change from recent years to be aware of: the SBA eliminated its Franchise Directory in 2023, which means lenders are now responsible for determining franchise eligibility. Many have turned to franchise certification services (like FranData) to streamline this. For you, this means it’s important that the franchise you choose is cooperative with providing any needed documentation to lenders about your franchise agreement’s compliance with SBA rules.

Additionally, there’s a broader review and tightening of some SBA rules after a period of very easy lending. We saw SBA initially raise caps and reduce requirements to stimulate lending, but by late 2024 and into 2025, they are ensuring due diligence is strong (essentially a return to normal underwriting standards). Overall, SBA loans are still very attractive.

What You Should Do: If you’re a first-time franchisee or looking at a smaller franchise investment, definitely consider an SBA loan to take advantage of the fee waivers – it could save you up to tens of thousands in fees. Work with a lender who is knowledgeable about franchise lending; they’ll guide you through the new processes of franchise eligibility. Ensure your franchisor either is listed in any third-party registries or can quickly provide the necessary documents to prove they meet SBA requirements. Lastly, even though the SBA is borrower-friendly, prepare a thorough loan application (solid business plan, good credit, some collateral if possible) since underwriting rigor is back. The SBA environment is positive for borrowers, but you still need to qualify and present a strong case.

Trend 3: Tech-Driven Lending and Fintech Influence

The rise of financial technology (fintech) is streamlining the lending process in ways that are particularly useful for tech-savvy franchise entrepreneurs. We’re seeing more online lending marketplaces and digital loan application platforms that cater to small business loans, including franchises. In 2023-2024, the SBA even opened up participation to more fintech non-bank lenders, which has carried into 2025, increasing the pool of lenders competing to fund businesses.

What does this mean for you? Faster loan approvals and more options. Some lenders use AI-assisted underwriting to quickly evaluate applications, pulling data from various sources to determine creditworthiness beyond the traditional credit score. While traditional banks might still take weeks to review an SBA loan application, certain fintech lenders aim to give conditional approvals in days. They often have user-friendly portals where you can upload documents and track application status in real time.

Another aspect is alternative financing products becoming more visible. For instance, revenue-based financing or merchant cash advances appear on platforms, offering quick cash based on your franchise’s revenues (though be cautious: convenience often comes with higher costs). There are also crowdfunding-like models and peer-to-peer lending where you pitch your franchise plan to individual investors. These haven’t overtaken traditional loans for franchises, but they provide supplemental avenues especially if you have a strong story or community backing.

What You Should Do: Embrace the new tech tools but do so wisely. It’s easier than ever to apply to multiple lenders online – just be mindful of your credit (lots of hard inquiries can ding your score, though some platforms do a “soft pull” initial check). Research fintech lenders’ reputation and read the fine print, as their loans might have different terms. If speed is of the essence, trying a tech-enabled lender could be a good move, but also weigh offers from conventional banks or local community banks, which sometimes offer a personal touch and advice.

Also, prepare to provide digital access to some of your data. It’s common now for lenders to ask to link to your bank accounts (to analyze cash flow) or accounting software. These can actually bolster your application if your finances are sound. Data-driven lending can work in your favor by highlighting strengths that a simple credit report wouldn’t show.

Trend 4: Alternative Funding Strategies Gain Popularity

In 2025, franchisees are increasingly mixing and matching their funding sources, and lenders are generally open to this as long as the capital stack is sound. Alternative funding strategies refer to non-traditional ways to finance a franchise, such as:

• 401(k) Rollovers (ROBS): Using retirement funds to invest in your business without tax penalties. This method has been around for a while and remains popular especially when loan lending is tight. It had some scrutiny from the IRS, but when done with professional help it’s legal and many franchisees use it for their equity injection.
• Equipment Leasing and Financing: Instead of taking a big loan for everything, some franchisees finance their equipment separately. As noted in franchise financing combinations, an SBA lender might not require real estate collateral on sub-$500k loans and even allow combining an SBA loan with an equipment lease. This can reduce how much cash you need upfront and align the financing term with the useful life of equipment.
• Investor Partnerships: With private equity interest resurging in franchising , some franchisees team up with investors. You might have an angel investor or a partner invest equity so you can reduce borrowing. Private investors are seeing franchising as a stable opportunity, so if you have a strong proposal, you might attract capital that way.
• Franchisor Financing Incentives: Some franchisors, especially newer or rapidly expanding ones, offer financing assistance. This could be deferred franchise fees, financing part of the cost themselves, or arranging special loan programs with preferred lenders. In a competitive franchise sales environment, more franchisors are touting “financing help” to attract franchisees.
• Line of Credit for Working Capital: Instead of borrowing all working capital upfront (which accrues interest immediately), some opt to get a line of credit to draw on if needed. Lenders are amenable to giving a line of credit once the business is open and showing revenue. It provides a safety net for seasonal or unexpected needs without adding to fixed debt obligations.

What You Should Do: Be open to a blend of financing sources. For instance, maybe use a 401(k) ROBS for the 20% down payment, get an SBA loan for the bulk, and lease the kitchen equipment. This combo could minimize your loans and interest. However, coordinate these pieces carefully. Discuss your strategy with a financial advisor or a franchise financing specialist (like us at Liberty) to ensure each piece complements the other and you’re not over-leveraging in total.

Also, if considering bringing on investors or partners, understand the implications (sharing ownership, profit, control). Legally, structure everything clearly. Lenders will want to know your ownership breakdown and that all equity funding is documented.

Trend 5: Focus on Franchisee Financial Education and Support

With all the options out there and the dynamic lending environment, a noteworthy trend is that franchisors, lenders, and SBA offices are putting more emphasis on borrower education. They’ve realized that an educated borrower is less risky. We see more franchisors guiding candidates on how to prepare financially to open a franchise, sometimes partnering with finance companies to hold webinars or workshops.

SBA local offices often hold sessions on how to apply for an SBA loan, and what the common pitfalls are. There’s also a push for transparency – lenders are trying to demystify the process by telling you upfront what ratios or criteria they want to see.

For you, this means more resources to help you succeed in getting funding. Take advantage of them. The more you know, the better you can position yourself.

Additionally, inclusion initiatives continue. There are specific programs and incentives for certain groups (veterans, minority entrepreneurs, etc.). For example, veteran franchisees still benefit from some SBA fee reductions or specialized loan programs. The SBA Community Advantage program (small loans through community-based lenders) continues to support underrepresented entrepreneurs.

What You Should Do: If your franchisor offers financing coaching or has relationships with lenders, use them. They can often fast-track your application with a partner lender who knows the brand. Attend an SBA seminar (many are virtual too) to pick up tips straight from the source.

Be proactive in asking lenders questions. Don’t be afraid to interview the lender as much as they interview you. What percentage of their franchise loans get approved? How experienced are they with your franchise brand or industry? A supportive lender will appreciate that you’re informed and will treat your application with that much more respect.

Finally, keep an eye on your industry specifics. For example, in 2025 certain sectors like personal services and QSR (quick-service restaurants) are expected to lead franchise growth, which might mean lenders have a big appetite for those. If you’re in a trending sector, highlight that in your application – show you know the market. If your sector is facing challenges, be ready to address how you’ll overcome them.

Conclusion: Leverage the Trends to Your Advantage

Franchise lending in 2025 offers a landscape of opportunities if you navigate it knowledgeably. Lower interest rates and SBA incentives can save you money; fintech innovations can save you time; alternative financing can fill gaps; and increased support can boost your confidence and preparedness.

The key takeaway is that staying informed is half the battle won. By understanding these trends, you can plan your financing strategy to minimize costs and maximize your chance of approval. For instance, you might decide to apply for that loan a little sooner to lock in a good rate, or you might negotiate with a franchisor for some financing assistance once you know it’s something brands are doing to stay competitive.

Next Steps: Let’s Talk

At Liberty Franchise Lending, we stay on the cutting edge of franchise financing trends so you don’t have to. We will help you interpret how changes in the market affect your individual situation. Do you want to capitalize on low rates or SBA fee waivers? Are you curious about trying a fintech lender or mixing funding sources? Our team has the expertise to guide you through these decisions.

The franchise lending environment in 2025 is optimistic – franchise growth is up, and lenders are actively looking to fund solid opportunities. Now is the time to act. Reach out to Liberty Franchise Lending for a free consultation on your financing needs. We’ll craft a customized plan that leverages all the latest trends and programs to your benefit. With our guidance, you can navigate the loan process with clarity and confidence, turning the 2025 lending landscape into the launchpad for your franchise success.

Let’s make the trends work for you – contact us today to get started on securing the best franchise financing for your business goals!