Financing a Franchise Business
If you have recently decided to start or purchase a business or franchise, one of the first considerations is how you will finance your business. Here are several options for business funding that will help you realize your dreams sooner than you think!
Use a 401K retirement account to fund your business. There is no tax penalty for this type of rollover and it may allow you to start your business without debt. Provided there is enough in your account to cover your start-up expenses, this can be a very good option. The 401K Rollover can be completed in as little as 3-4 weeks.
The U.S. Small Business Administration offers loans for small business. This is a loan guarantee program where part of the loan is guaranteed by the Federal Government. The loan originates through a bank and the SBA guarantees the funds. This type of loan is used quite often for small businesses and offers competitive interest rates. The SBA offers different types of loans based on the initial funding request. For franchises, there is a master list of approved franchises which speeds up the process for this type of loan. An SBA loan can take several weeks to complete depending upon the process required by the bank and other factors.
Portfolio loans allow you to use the equity you have in your bonds, stocks, mutual funds, or other securities to fund your business. The interest rates are typically low and the time table for completing the loan process can be as little as 2-3 weeks.
Secured or Unsecured loan
A secured loan is a loan such as a home equity loan – it is secured by something you own or have equity in. An unsecured loan does not have collateral tied to it, but you will need good credit to obtain an unsecured loan and you will probably pay a higher interest rate than for a secured loan. These loans may also be known as working capital loans.
A few franchisors offer internal financing. This can be a great option and offers faster approval and start-up. Be sure to check the interest rates as they may be higher than other options.
Select Franchise Consulting works with financing partners that will assist you in analyzing your potential investment levels and finding the best type of funding for your business venture. Call today to get started.