# Franchise Funding With Credit Challenges

> Franchise owners with credit challenges: scores from 500 considered, which products fit each score band, why deposits and royalty history matter, and what hurts.

Source: https://mfebusinessloans.com/franchise-funding/bad-credit/ (Merchant Fund Express, updated 2026-10-21)

## The short answer

Merchant Fund Express considers franchise owners with credit scores from 500. A score of 600+ opens better offers, and 650+ opens the line of credit and term loan. Below that, the unit's deposits and its record of paying royalty and ad fund drafts carry the file, so a strong unit with a bruised score still has real options.

## Why does a franchise unit with weak credit still have options?

A credit score tells a reviewer how the owner handled credit in the past. Bank statements tell a reviewer how the unit runs today. For a franchise unit the statements show something extra: royalty and ad fund drafts clearing on schedule, week after week. A unit that has paid every royalty draft for two years has a track record no score captures.
Merchant Fund Express reads both, and for owners in the 500s the deposits do most of the work. The general guide is the best business funding for bad credit; this page is the franchise version.

## Which products fit which score?

Score band | What fits | What the review leans on |
500 to 599 | Deposit-based options sized on the unit's revenue | Steady deposits, healthy balances, clean recent months |
600 to 649 | Revenue-based financing or MCA (Tier 2) | 6+ months, $60K verifiable revenue, $800 minimum daily balance, max 5 negative days / NSFs |
650 and up | Line of credit or term loan (Tier 1) | 3+ years, $25K a month with 8+ deposits, no bankruptcy or foreclosure in 3 years |
Equipment financing is reviewed on the vendor quote and the equipment itself, so it can sit alongside any band. Full score detail is on credit score requirements.

## What helps a franchise file with a lower score?

Royalty and ad fund drafts clearing on time every period
Deposits steady or growing over the last 3 months
Daily balance that stays above $800 even on draft days
Every unit's deposits going into that unit's own business account
A clear use for the money: stock, a repair, a payroll ramp
Existing advances (if any) paid without missed debits

## What hurts most?

Some things weigh more than the score itself. In order of how often they stop a file:
Open bankruptcy: an open case stops the Tier 2 review; Tier 1 also needs no bankruptcy or foreclosure in the last 3 years
NSFs and returned debits: especially a returned royalty draft, which signals strain to everyone
Negative days: more than 5 in the review period is outside Tier 2
Prior defaults on an earlier advance
Too many positions: stacking new advances to cover old ones
If the problem is a heavy daily payment from an existing advance, address that first with how to lower your franchise MCA payment.

## Worked example: a 560 score and a healthy unit

A hypothetical owner has a 560 score from a medical bill two years ago. The unit has operated four years and deposits $70,000 a month, with royalty and ad fund drafts of about $5,200 a month and no current advance.
Line | Figure |
Score band | 500s: deposit-based option |
Royalty and ad fund | $5,200 a month, about 7.4% of deposits |
Illustrative new weekly payment | $900 x 52 / 12 = $3,900 a month |
Total fixed debits | $5,200 + $3,900 = $9,100, about 13.0% of deposits |
If the score rises past 600 | Tier 2 revenue-based financing comes into view |
If it rises past 650 | The unit already meets the 3-year line of credit test on time in business |
The unit carries the payment comfortably. Improving the score later moves the owner into cheaper products, so keep the account clean.
Figures in this example are illustrations of the arithmetic, not an offer, quote or approval. Real terms depend on the file and the funder.

## How do you apply?

Apply in about 5 minutes; the start is a soft credit pull, so checking your options does not hurt your score. Send about 3 months of business bank statements for the unit's entity. Sole proprietors are eligible, ITIN applicants are accepted, and Spanish-speaking support is available. Merchant Fund Express gives a same-day decision on a complete file. Terms depend on the business's revenue and history. Start the application.

## Keep reading

Franchise funding hub: every franchise guide in one place
Business funding for bad credit: the general guide for any business
Credit score requirements: score bands in detail
Franchise funding requirements: Tier 1 and Tier 2 in one table
Funding with existing advances: if you already carry a position

## Common questions

### What is the lowest credit score Merchant Fund Express considers?

Scores from 500 are considered. 600+ opens better offers, and 650+ opens the line of credit and term loan.

### Does applying hurt my credit?

No. The application starts with a soft credit pull.

### Does my royalty history count?

Yes. Royalty and ad fund drafts clearing on schedule show up on the statements and support the file.

### Can I apply with an open bankruptcy?

No. An open bankruptcy stops the review. Tier 1 products also need no bankruptcy or foreclosure in the last 3 years.

### Can I get equipment financing with a low score?

Equipment financing is reviewed on the vendor quote and the equipment, so it is worth applying even with a score in the 500s.

### Can I apply with an ITIN?

Yes. ITIN applicants are accepted and Spanish-speaking support is available.

Apply with Merchant Fund Express: https://merchantfundexpress.com/current-application.html?utm_source=mfebusinessloans.com&utm_medium=franchise&utm_campaign=franchise-funding&utm_content=bad-credit