Financing a Home Care Franchise Resale

What exactly will the buyer need to fund?

Begin with the existing agency and the proposed sale. The seller may transfer business assets or equity. The franchisor may require a new agreement or consent to an assignment. List the legal buyer, rights, debts and services. A familiar trade name does not prove that the buyer receives the seller's remaining term, royalty rate or territory.

The franchise resale guide addresses the wider transfer review. This financing guide concentrates on the funding plan for that purchase. If the buyer is still choosing a model, the franchise versus independent comparison comes first. A loan application cannot resolve a mismatch between the buyer's operating plan and the rights being purchased.

Separate seller price from every other use of money. Include transfer charges, training and travel, required technology, professional costs and the operating cash the buyer needs. Record who receives each payment, when it is due and what evidence supports it. Then ask the lender which uses qualify and which must be funded separately.

Reconcile any charges assigned to the seller as well. The franchise seller cash bridge separates immediate proceeds from a conditional escrow and checks for duplicate charges. Those seller amounts should agree with the buyer funding plan without being counted twice.

How do the separate approval decisions fit together?

Keep a condition schedule with an owner, supporting document and open issue for each decision. The order can differ by deal. Some documents need agreement before the lender can finish its review; others must be signed before funds are released. A general statement that the deal is approved does not tell the buyer which conditions remain.

Assign someone to track changes across the schedule. A revised franchise fee changes the cash budget; a delay in required training can change staff coverage. A lender's revised amount can change the buyer's cash commitment. Keep those links visible before the parties select a closing date.

What does the SBA Franchise Directory actually establish?

SBA's guidance requires brands meeting the FTC franchise definition to be on its Directory to obtain SBA financing. Other eligible brands that do not meet that definition can request inclusion. The substance of the relationship matters; calling an agreement a license does not decide its treatment. The lender should confirm the applicant's actual brand and agreement type. (Source: SBA Directory guidance)

The reviewed SOP requires the Directory check before a non-delegated application is submitted to SBA or a delegated loan is approved. A brand that requires listing but is absent must complete the applicable process before the loan can proceed at that stage. The franchisor's certification is part of the brand process; a buyer's letter of intent is not a substitute.

SBA expressly states that listing is not an endorsement or assurance of business success. The current landing page identifies an August 20, 2026 edition. Check the available edition again for the transaction instead of relying on an old screenshot, a prior owner's loan or this article. No individual franchise brand is represented here as verified eligible. (Source: SBA Directory)

Give the lender every agreement under which the applicant will operate. The SOP addresses multiple brands and agreements separately. A management agreement outside the listed brand's disclosure documents can require its own review for passive-business eligibility. Operating an agency and receiving royalties from units owned by other franchisees are also different activities. Do not assume one brand check settles a more complex structure.

Which franchise documents belong in the funding review?

Use the current franchise disclosure document alongside the buyer's proposed contracts. The FDD organizes information; the executed agreements establish the actual obligations. Compare the seller's current charges with the buyer's required terms, including any separate software, marketing, training or renewal costs.

FTC guidance identifies Items 5–7 as a starting point for initial and ongoing costs and Item 17 for renewal, transfer and related conditions. Item 19 addresses financial performance representations, subject to its rules and exceptions. System figures and the records of this existing outlet answer different questions. Do not use the franchisor's financial statements as though they were the target agency's accounts. (Source: FTC franchise buyer guide)

If financing is offered through the franchisor or an affiliate, examine Item 10 and the actual financing documents. The FTC compliance guide describes direct and indirect arrangements, referral compensation, finance charges, repayment and default terms. Sample financing documents belong in Item 22. A referral to a lender does not establish the amount this buyer can borrow. (Source: FTC compliance guide, printed pages 59–62)

The reviewed SBA procedure requires the lender to obtain the executed franchise agreement and other documents the franchisor requires the franchisee to sign. For 7(a), this occurs before any loan disbursement. That requirement is distinct from the earlier Directory check. Match the closing file to the actual buyer and final document versions. (Source: SOP 50 10 8, Section A, chapter 1, G)

How should local earnings support the requested loan?

Use the agency's actual records to build the repayment case. Reconcile monthly sales, service hours, payroll, franchise charges and cash received. Explain unusual items and changes in rates or staffing. A system-wide sales average cannot show whether this agency earns enough to service the proposed debt.

The buyer's forecast should include the costs that continue after the seller leaves. Required royalties are not optional add-backs. If the buyer must replace the seller's scheduling or management work, include a supported replacement cost. If a new agreement changes fees, model the difference without deducting charges already included in the accounts.

Connect earnings to payment timing through the working-capital guide. Payroll may leave the account before the corresponding receipts arrive. Identify whether the seller retains existing receivables and how later collections will be handled. An accrual profit does not establish cash available for the buyer's first payroll.

The SBA 7(a) acquisition guide explains the separate credit, valuation, equity and guarantee questions. Franchise eligibility adds a review layer; it does not remove those requirements. The lender can also require more equity than a program minimum when the transaction's risk or funding structure warrants it.

Worked example: what does the complete cash budget show?

Consider a fictional purchase of an existing nonmedical home care franchise by a completely new owner. Assume the buyer proposes Standard 7(a) financing and the lender accepts every project use below for this example. No property, seller note or prior deposit is included. The figures are invented assumptions, not a brand's fees, a loan offer or a finding that these costs qualify in a real application.

The five uses beyond seller price total $200,000. Opening business cash is a funded balance for future operating needs, not another expense to deduct from earnings at closing. The professional and closing line includes all such costs assumed in this example. Actual loan fees, deposits or other costs not covered by a real budget must be added or identified separately.

Now assume the lender provides $1,020,000 available for the listed uses, with no further fees withheld. The buyer contributes $180,000 to complete the $1,200,000 project. That is fifteen percent of the project, even though the buyer initially focused on ten percent of the seller's $1,000,000 price.

Under the reviewed complete new-owner Standard rule, the usual minimum injection is ten percent of total project costs, with specified exclusions. In this simplified accepted-cost case, that minimum would be $120,000. It does not make a $1,080,000 loan available. The hypothetical lender has offered less, so this buyer must supply the larger $180,000 contribution.

Assume the buyer also preserves $30,000 of personal reserves outside the business. Required buyer liquidity is then $210,000: $180,000 into the project plus $30,000 retained personally. That personal reserve does not also count as the agency's $135,000 opening cash. The two balances have different purposes and must not be counted twice.

What changes if the available loan is smaller?

Keep every project use and the separate personal reserve unchanged. Suppose net loan funding falls by $50,000 to $970,000. The buyer must replace that amount with additional project cash or negotiate a supported change in the transaction. Deleting the operating cash line would conceal the gap rather than establish an affordable handoff.

The $50,000 reduction raises total buyer liquidity from $210,000 to $260,000. Each project still balances: loan proceeds plus contributed buyer cash equal $1,200,000. The personal reserve remains outside that calculation. No loan payment, rate or return is implied; repayment affordability needs a separate forecast using the lender's actual terms.

A seller note might change the structure, but it is debt with its own conditions. Under the reviewed complete-change Standard rule, seller debt counted toward required equity must meet full-term standby and contribution limits. A two-year payment pause alone does not meet that rule. Review any proposed note with the lender rather than filling a cash shortfall with an unapproved promise.

How should disclosure, funding and operating dates be coordinated?

For a covered franchise sale, the federal rule requires disclosure at least fourteen calendar days before the specified agreement with, or payment to, the franchisor or an affiliate. A unilateral material agreement revision has a separate seven-day requirement, with an exception for changes arising from buyer-initiated negotiations. Counsel should map the actual parties and events. (Source: 16 CFR 436.2)

An existing-franchisee transfer without significant franchisor involvement is excluded from the rule's sale definition; approval or disapproval alone is not significant involvement. This does not eliminate contractual consent or separate state requirements. Do not turn federal disclosure timing into a universal period before every payment to an independent seller. (Source: 16 CFR 436.1(t))

Program guidance reviewed September 7, 2026 uses SOP 50 10 8 with applicable later notices. SBA has announced SOP 50 10 8.1 for applications issued an SBA loan number on or after October 1, while its issuance notice separately describes September submission handling. Have the lender resolve a transaction crossing that transition; do not substitute closing date or apply the future version early. (Source: SBA issuance notice)

Keep care delivery on the schedule too. Confirm required operating authority, payer arrangements, system access and staff coverage with the responsible reviewers. The licensing overview helps organize those questions. Loan proceeds cannot cure an unsupported plan to use the seller's credentials after a transfer.

Common mistakes and the next decision

Common mistakes include using the seller's fee schedule for the buyer, assuming a Directory listing proves value, counting a paid deposit as cash still available, and treating a franchisor referral as committed credit. Another is leaving opening payroll cash outside every funding source while still calling the deal fully financed.

Before relying on a proposal, reconcile uses to documented sources, identify unresolved conditions and test the operating forecast. Keep sensitive financial and identity records within authorized diligence and the lender's secure process. Use the proof-of-funds definition to distinguish accessible buyer money from an expectation of future financing.

Jason Taken can help organize the transaction evidence and commercial questions. Franchise and healthcare counsel, the accountant, operator and lender resolve their respective requirements. A useful financing decision shows the buyer what must be funded, what has been verified and which remaining conditions could change the purchase.