How to Get a Bank Loan for a Franchise in India: MUDRA, SBI, and NBFC Options

"I want to start a franchise but I do not have Rs 5 lakh saved up." We hear this every week. The good news is that you do not need the full amount in cash. Multiple loan options exist specifically for small business owners and franchise investors in India.

Here is every financing option available to you, with exact details on how to apply.

1. MUDRA Loans (Pradhan Mantri Mudra Yojana)

The government's flagship scheme for small businesses. Three categories:

Interest rate: 8-12% per annum (varies by bank and your profile)

Repayment: 3-5 years

Collateral: No collateral required for loans up to Rs 10 lakh. This is the biggest advantage.

How to apply: Walk into any nationalised bank (SBI, PNB, Bank of India) or apply online through mudra.org.in. You need:

Processing time: 2-4 weeks for Kishore and Tarun categories.

Pro tip: Banks prefer lending to franchise businesses over independent startups because the brand association reduces their risk. Mention the franchise brand, its track record, and number of outlets in your application.

2. SBI E-Mudra Loan

SBI offers an instant e-Mudra loan up to Rs 1 lakh through its YONO app. For amounts above Rs 1 lakh, visit the branch.

For franchise investors, the branch route is better. Walk in with your franchise documents, explain the business model, and apply for a Kishore or Tarun MUDRA loan.

3. Stand Up India Scheme

Specifically for SC/ST and women entrepreneurs. Loans from Rs 10 lakh to Rs 1 crore.

Interest rate: Lowest available rate of the bank (typically 8-10%)

Repayment: Up to 7 years with an 18-month moratorium

Who qualifies: SC, ST, or women entrepreneurs setting up a new enterprise. At least 51% ownership must be with the SC/ST or woman applicant.

If you qualify, this is one of the best loan options available. Apply at standupmitra.in.

4. NBFC Business Loans

Non-banking financial companies like Bajaj Finserv, Lendingkart, and FlexiLoans offer quicker processing than banks, though at slightly higher interest rates (14-20%).

Advantages: Faster approval (sometimes 48 hours), less paperwork, digital process.

Disadvantages: Higher interest rates, shorter repayment periods (1-3 years).

Best used for bridging a gap rather than financing the entire franchise investment.

5. Credit Line (Overdraft Facility)

Instead of a term loan, consider a business overdraft facility. You get a credit limit (say Rs 5 lakh) and only pay interest on the amount you actually use.

Useful for working capital management. Draw funds when you need inventory or materials, repay when revenue comes in.

How Much Should You Borrow vs Self-Fund?

Our recommendation: fund at least 50% of the total investment from your own savings. Borrow the remaining 50% or less.

Why? Borrowing the entire amount puts too much pressure on early-stage cash flow. Your EMI payments start from month 1, but your outlet may not be profitable until month 3-4. If your entire investment is borrowed, those early-month EMIs come from your personal pocket.

Example for a Rs 5 lakh franchise:

The Application Checklist

Regardless of which loan you pursue, have these ready:

TBWX Franchise and Loan Compatibility

TBWX franchise investment (Rs 3-5 lakh) falls perfectly within the MUDRA Kishore category. No collateral needed. Many of our franchise partners have used MUDRA loans to finance part of their investment.

We provide a franchise offer letter that banks accept as part of the loan application. Our franchise team can also help you prepare the one-page business plan that banks require.

[Explore TBWX franchise options](/franchise) or [apply to get started](/franchise/apply).