Start with your own money
Banks and schemes usually want you to put in some of your own money, called margin money. Ask your bank branch what share they need for your project.
Borrow only what your monthly sales can repay, even when sales are low.
MUDRA loans
Under the Pradhan Mantri MUDRA Yojana, loans for small non-farm businesses are given by banks and other lenders in four bands: Shishu up to Rs 50,000; Kishore above Rs 50,000 up to Rs 5 lakh; Tarun above Rs 5 lakh up to Rs 10 lakh; and Tarun Plus above Rs 10 lakh up to Rs 20 lakh.
Tarun Plus is meant for those who have taken a Tarun loan earlier and repaid it well. Limits can change, so confirm with the bank and on the MUDRA website before you apply.
MUDRA does not lend directly to you. You apply at a bank, a small finance bank, a microfinance lender or an NBFC. A bank may treat a franchise shop as a normal small business, but each bank decides its own file.
PMEGP
The Prime Minister's Employment Generation Programme gives a subsidy linked to a bank loan. Trading is mostly not allowed under PMEGP. Sales outlets are allowed in some cases, such as in certain regions or when backed by a manufacturing or service unit, with a lower cost cap.
So a pure franchise shop that only resells goods may not qualify. A service unit or a small manufacturing unit may. Check with your district KVIC, KVIB or DIC office. We could not confirm the current limits on the official PMEGP portal, so we do not state them.
Stand-Up India
Stand-Up India helps bank loans between Rs 10 lakh and Rs 1 crore for Scheduled Caste, Scheduled Tribe and women entrepreneurs. The business may be in manufacturing, services, agri-allied work or trading.
Its official site does not mention franchises. Ask the bank if your franchise project fits.
CGTMSE and franchise-finance tie-ups
CGTMSE is a trust set up by the Ministry of MSME and SIDBI. It guarantees collateral-free loans given by member banks and other lenders. It does not lend money itself. The bank decides whether to cover your loan under it.
Some brands say they have tie-ups with banks for franchise loans. Treat this as an introduction only. The bank still checks you and your project, and the loan is your debt. Ask the bank directly.
Documents banks ask for
Lists differ by bank. These are common. Ask your branch for its own list.
- Identity and address proof (such as Aadhaar and PAN)
- Photos and recent bank statements
- Franchise agreement or offer letter, and a written cost list from the brand
- Project report with sales and cost estimates
- Shop ownership papers or rent agreement
- Income tax returns and proof of your own contribution
- Business registrations as needed, such as Udyam registration and GST
- Collateral papers, if the bank asks