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!
Retirement Account Rollover
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. There are several businesses that specialize in this type of funding. Be sure to contact an expert to help with this type of rollover to avoid negative tax implications.
The U.S. Small Business Administration offers loans for small business. This is a loan guarantee program where the Federal Government guarantees part of the loan. 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. A qualified applicant typically has good credit and 20-30% down payment.
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 timetable 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 for qualified applicants. 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.
Family or Friends
Occasionally, there are family members that are willing to loan capital to assist with a business. Be sure to state your terms in writing and have an attorney write up legal documents to avoid any disagreements in the future.
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. For more information check out our website at Select Franchise Consulting.