If you’ve ever considered buying a franchise, you know that financing can sometimes be tricky. But don’t let the challenge of getting your finances in order deter you from achieving your entrepreneurial dreams.
Here are three ways to finance your franchise and make it a reality.
SBA Loan
The Small Business Administration (SBA) offers loan programs specifically designed to help new franchise owners with their start-up costs. The SBA makes it easier for entrepreneurs to qualify for loans than if they were applying through other traditional lenders, since they guarantee up to 75% of the loan amount. To be eligible for an SBA loan, you must have good credit and provide a business plan, financial statements, and collateral. Keep in mind that the maximum loan amount allowed by the SBA is $5 million, so if you need more than that, you may need to look elsewhere.
401k Rollover (ROBS)
Rollovers as Business Startups (ROBS) are becoming increasingly popular among prospective franchise owners who have money saved in their 401k accounts but don’t want to pay taxes on those funds. Using ROBS allows them to roll over their 401k funds into a C corporation which can then be used towards starting a new business venture like a franchise. This type of financing is great for those who have saved enough in their retirement accounts and who don’t want to tap into other sources of financing such as personal or bank loans. However, because ROBS is a complex process with numerous regulations, it’s important to enlist an experienced financial partner to help you do it right.
Tap Home Equity
If you own residential property, tapping into your home equity could be another way of raising capital for franchising opportunities without having to take out any loans or deplete your retirement savings account. With this type of financing, you would use your home as collateral and borrow against its value up to 85%. This can give you access to more money than traditional lenders typically offer and at competitive interest rates as well. And since all the funds come from one source, it’s easier to keep track of repayment terms while also helping protect your credit score from being affected by multiple payments from different lenders each month.
A Home Equity Line of Credit is the fastest way to go and perhaps the easiest. This type of loan allows you to borrow money against the equity of your home and is usually repaid over a period of time. You can choose between variable or fixed interest rates, meaning the rate won’t change during the life of the loan. The repayment terms are flexible and you can pay off portions or all of it anytime without penalty.
Owning your own franchise can be an exciting yet daunting process when it comes time to finance it — but there are options available! Depending on how much capital you need upfront and what kind of risks you are willing/able to take with regard to debt repayment or retirement savings withdrawal — there are several ways that prospective franchise owners can find the money they need for their dream businesses . Whether it's tapping into existing resources like 401Ks or home equity or looking into small business loans from organizations like the SBA — there's something out there for everyone! So do some research on all these options before taking the next steps towards owning your own successful franchise today!
Contact Jack and Jill at The Franchise Insiders. Their free franchise consulting service can get you the right financing connections in no time and is 100% Free to you.
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