Financing
Although there are many different ways to fund a franchise purchase, here is
some information on some of the most common forms of financing used;
Retirement Fund Financing
There is a way to use your own retirement funds to finance the purchase of a new
or existing franchise, without taking a distribution and incurring penalties.
This is structured as an investment of your retirement account. Using
retirement funds means no debt payment adding to your initial business
overhead. In addition, when your business profits so does your tax-deferred
retirement account. Many new franchisees use retirement fund financing as down
payments on SBA or bank loans.
SBA Loan
An SBA loan is a bank loan guaranteed by the Small Business Administration
(SBA). These loans are designed to help individuals purchase new or existing
franchises. Other than using personal/home loans, this is probably the most
common way that new franchisees finance their franchise purchase.
HELOC/Refinance
Please fill out the form below if you are interested in receiving information
about how to finance a franchise purchase using a Home Equity Line of Credit
(HELOC) or home refinance.
Bank Loan
Sometimes referred to as “commercial loans”, these loans are made to the new
business. These loans typically require a good deal of collateral. The banks
favorite form of collateral is real estate. Therefore it is typically less
expensive to use a HELOC or refinance to provide funding sources from your
current real estate holdings.
Family and Friends
Borrowing money from family and friends can provide the funding necessary to
purchase a new franchise. However loans from closely related parties can often
create friction in tight social circles. Be sure to carefully consider if this
is a good financing option for your franchise purchase and make sure all
expectations are clearly detailed in writing.