We talked last week about acquiring funding to purchase your franchise. There are several ways for you to finance the purchase of a franchise and today we want to go a little more into detail about what those options are. Keep in mind, your options will depend on your credit score, your net worth and a few other things. These are just options that are available.

SBA Programs

The U.S. Small Business Association helps Americans start, build and grow businesses. One of the things they do is offer an array of financing for small businesses. This ranges from micro lending to substantial debt and equity investment capital.

You can find a lender that offers loans for your business through SBA and the loan will be guaranteed by SBA. This allows you to get competitive terms, you can get additional support and advice from SBA and many of the loans come with unique benefits. Having SBA involved in the loan will reduce the risk for the lender and gives you the buyer easier access to capital.

SBA can help you find an investor through a Small Business Investment Company (SBIC), which are licensed by SBA. These are private investors that participate as limited partners and invest funds into your business.

Business Loan

To be more specific, a Revolving Unsecured line of business credit. An unsecured business line of credit is a debt financing option that offers a revolving credit limit but doesn’t require you to offer up collateral to secure that revolving credit limit. The key here is that you don’t have to offer up collateral. When you are opening a new business, you don’t have collateral related to the business that you can offer up. Because unsecured lines of credit won’t require collateral, they will typically come with higher rates, shorter repayment terms, and lower credit limits.

IRA/401K No Penalty Business Investment

This is the most exciting funding option, in our opinion. Many people have an IRA or a 401K from a current or previous job. There is quite a bit of money sitting in those accounts that you can’t pull out without a penalty but you can invest into securities without penalty. Many people don’t realize that a franchise is a type of security! That means you can allocate funds from your 401K or IRA towards the purchase of a franchise and you won’t get hit with a penalty or taxes that you would if you just pulled the money directly out of one of those accounts.

Next Steps

So what is next? You know what your options are and now you want to move forward and find the right franchise for you. Let’s set up a call so we can talk about what your options are! Fill out the form below and we will get started.