Pre-Requisites to Qualify

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You can convert (rollover) your 401k retirement funds into a self-directed IRA, whereby you can purchase a franchise business without early withdrawal tax penalties. By investing your own money into your business, you avoid debt, allowing your business to quickly achieve positive cash-flows.   To be eligible, you would need to have left the original employer who sponsored your 401K. It is also recommended you have a minimum of $25,000 in your account. Also, you are not required to rollover the entire

Small Business Administration (SBA) loan programs, such as 7A & 504, are SBA-underwritten loans. Typically, if a franchise company is pre-approved by the SBA, a bank is more likely to provide franchise financing.

These programs are for existing businesses having a minimum of 2 years of revenues and profits. The obtained funds can be used for operating capital, equipment or real estate expansion. Funds can also be used for restructuring business debt incurred at start-up.

Unsecured Lines of Credit can be used to fund portions of your franchise business purchase. Once you have created a business entity and your FICO score is above 700, you can apply for credit lines under your newly created franchise business. The application process is streamlined and timing to get funded generally takes approximately 3 weeks. 

The credit lines are issued as business credit cards in which cash advances or credit purchases are allowed. Since these cards are lines of credit, there are no loan payments. Only pay when you access the credit line.

In terms of funding, this type of financing is the most accessible and is recommended for franchise businesses seeking funding for under $50K.

Securities Based Lines of Credit funding is a type of financing where your FICO score is not a factor. If you hold publicly traded stock or other US or Foreign securities, you can borrow against the their value. A great advantage is that you retain full ownership and access to your securities. This includes interest, dividends and appreciation.

If you want more control of your investments and buy a franchise business, this type of financing can be a good avenue for financing your franchise purchase. You can apply the funds towards franchise fees, start-up costs, equipment acquisitions real estate, or working capital.

The current loan range is $55K up to $10MM.

Home Equity Lines of Credit funding uses your home as collateral. Therefore, your home must be worth more than your owe, have equity, to be able be eligible. Once the maximum credit amount has been established, you can then draw off the account when you need the funds. It’s similar to a checking account that allows you to use the equity in your home to purchase a franchise business.

The rates are usually lower than traditional lending and the amount of the credit line can increase along with your home’s value.

It has to be noted that with the sharp declines in most real estate markets, this type of funding is very difficult to secure.