Answer first
Four cash numbers matter, not one.
Buyers often ask for a down-payment percentage before they know the complete franchise project cost. That reverses the work. First build the uses of funds; then separate the portion that may be financed from the cash that must come from you or another documented source.
The FTC says FDD Items 5–7 describe initial and ongoing costs such as franchise fees, inventory, signs, equipment, leases, royalties, and advertising—but it also advises buyers to investigate costs outside those items, including professional help. Read the FTC consumer guide, then pressure-test the numbers with actual quotes.
If you still need the total-cost side of the equation, begin with our guide to how much it really costs to start a franchise. This page focuses on the next question: how much cash should be in—or safely outside—the funding plan.
Your lender-required contribution
A lender may require you to bring equity into the project. The amount and acceptable sources depend on the loan, lender, project, borrower, and current program rules—so model a range until you have a written lender structure.
Costs the financing does not cover
Legal review, deposits, timing gaps, overruns, or other project costs may sit outside the final loan. If a cost is real but not financed, it still has to come from somewhere.
Cash the business needs after opening
Payroll, rent, inventory, marketing, debt payments, and surprises continue after opening day. Working capital belongs in the project budget before you decide how much cash is safe to contribute.
Your personal runway
Business reserves and household reserves are different. Protect enough personal liquidity to cover the time between leaving a paycheck and reliably taking income from the business.
A real planning comparison
One project. Three cash decisions. Three different tradeoffs.
The calculator’s loaded example models a $370,000 project and $95,000 of available cash. At an illustrative 10.75% rate and 10-year term, changing only the funding sources produces these outcomes:
Protect cash + model potential ROBS
Loaded calculator example
$55,000 cash + $35,000 potential ROBS
Cash retained
$40,000
Estimated loan
$280,000
Monthly payment
$3,817
Use cash for the full contribution
$90,000 cash
Cash retained
$5,000
Estimated loan
$280,000
Monthly payment
$3,817
Keep the same cash, use no ROBS
$55,000 cash
Cash retained
$40,000
Estimated loan
$315,000
Monthly payment
$4,295
These are planning scenarios, not recommendations or lender terms. The comparison isolates a genuine decision: preserve liquidity, avoid using retirement assets, or reduce modeled debt. No calculator can decide which risk belongs to you.
The retirement-fund question
ROBS can change the stack. It cannot remove the risk.
A properly structured Rollover as Business Start-up may allow an eligible retirement plan to invest in company stock. In the example above, the modeled ROBS amount lowers the loan without consuming the buyer’s remaining cash.
But those retirement assets are then exposed to the business, and the plan has ongoing administration and compliance duties. The IRS warns that ROBS arrangements can create qualification, discrimination, valuation, filing, and prohibited-transaction issues when operated incorrectly. Review the IRS ROBS compliance guidance and our 401(k) rollover overview before modeling those funds as committed.
What the loan may cover
Use SBA financing for the project—not as permission to empty your reserves.
The SBA lists real estate, working capital, equipment, furniture, supplies, refinancing, changes of ownership, and multi-purpose projects among eligible 7(a) uses. The lender—not the calculator—decides what belongs in the final loan and whether the borrower and project qualify. See the official 7(a) program overview.
For franchise projects, also confirm the brand’s current status in the SBA Franchise Directory. Directory placement helps lenders evaluate program eligibility; SBA explicitly says it is not an endorsement of the brand or a promise of business success.
Calculate your number
Build a range before you build an application.
- 01
Start with the FDD Item 7 range, then replace ranges with actual quotes wherever possible.
- 02
Add costs that may sit outside Item 7: legal review, financing and closing costs, local permitting, and a realistic contingency.
- 03
Separate business working capital from the money your household needs while the franchise ramps up.
- 04
Enter only committed funding sources. Keep possible cash, ROBS funds, gifts, or other sources out until the structure is real and documented.
- 05
Run multiple versions instead of trusting one answer: lower cash, higher cash, no ROBS, more working capital, and a lender-provided rate and term.
Common questions
Before you commit the cash
Is the cash I need the same as the SBA down payment?
No. A lender-required contribution is only one component. You may also need cash for costs outside the financing, post-closing business reserves, and your own living expenses while the business ramps up.
Can an SBA loan cover working capital for a franchise?
The SBA lists short- and long-term working capital among eligible 7(a) uses. The amount a lender will include depends on the project, projections, documentation, and its underwriting decision.
Can ROBS reduce the cash I put into a franchise?
A properly structured ROBS arrangement may supply business capital from eligible retirement funds, but the retirement plan invests in company stock and remains subject to ongoing compliance requirements. It can change the funding stack; it does not remove the business risk.
What number should I calculate first?
Calculate the complete project cost first. A down-payment percentage applied to an incomplete budget creates a precise-looking answer to the wrong question.