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Essential Resources for Franchise Financing


Understanding Your Franchise Financing Options

Once you’ve found the right business for you and you’re ready to move forward with financing a franchise, it’s time to return to the funding options introduced to you in your pre-qualification summary. Take a minute to review these popular franchise-funding methods, and learn more about optimizing your buying power.

For those looking for debt-free financing, Rollovers for Business Start-ups (ROBS) is an excellent option when available. ROBS, also known as 401(k) business financing, makes it possible to utilize the funds in your retirement account for small business financing — including start-up costs, purchasing an existing business, or funding a franchise — all in a tax and penalty-free transaction.

ROBS doesn’t have collateral or credit requirements. Your funding is only limited to the amount of money in a rollable retirement account such as an IRA or 401(k) —Guidant does recommend ROBS for those with over $50,000 in their eligible retirement fund. Many franchise owners find success funding through the ROBS arrangement because funding is very fast, there are no monthly interest payments to make, and ROBS allows owners to start cash-rich.

Many hopeful small business owners look to finance a franchise turn to Small Business Administration (SBA) funding. SBA loans offer low-interest rates and favorable repayment terms for amounts up to $5 million. With small business friendly terms and high maximum funding, franchise owners with higher initial start-up costs often turn to SBA loans.

However, with credit, collateral and down payment requirements, SBA loans are not easy to qualify for — many applications are rejected. Thankfully, combining ROBS and SBA funding can both increase your attractiveness as a borrower and your buying power. Once the ROBS funding transaction is complete, the funds obtained can be used as the down payment on an SBA loan — this transaction is perfectly legal and makes it possible for you to increase your budget when financing a franchise.

Other Funding Options

If you don’t have the money in your retirement account or don’t meet the qualifications for SBA lending, there are still plenty of options for franchise financing. Whether you want to utilize traditional collateral-based lending or learn more about equity funding options, funding should not be a barrier between where you’re at now and becoming a franchise owner. Guidant’s Complete Guide to Your Small Business Funding Options takes a deep type into just about every funding option available, so you can learn more about which is the right choice for you.

Knowing where to turn when you’re deciding how to fund a franchise will help make you feel even more empowered as a small business owner. From business calculators to franchise brokers and alternative funding sources, be sure to utilize all of the resources at your disposal during the financing process.


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