Learn franchise financing options available to you: the ROBS, the SBA loan and the Unsecured loans!
Before you give up on your dream to own your own franchise business, because you don’t think you have the capital to do so, take some time to explore several fantastic financing/funding options available to you: the ROBS, the SBA loan and the Unsecured loans!
In this article we explain the basics of these 3 very popular options. We also provide a link to your preferred funding partner – Guidant Financial – who can help you explore and identify which option(s) you are qualified for.
ROBS (401K Rollovers for Business Start-Ups)
With 401(k) business financing (formally known as Rollovers for Business Start-ups or ROBS), you can use funds from an eligible retirement account to buy a small business or franchise without taking a taxable distribution or getting a loan.
By starting your business debt-free, it removes the burden of having to make monthly payments as you launch your business, allowing you to be profitable sooner. Plus, 401(k) business financing doesn’t trigger an early withdrawal fee or tax penalties, so you can continue to save for retirement while building your business.
The Rollovers for Business Start-ups structure must be formed correctly in order to qualify under IRS code and generally involves five steps. Although complex, these steps can usually be completed in less than three weeks. Here’s how it works:
- A new business is established as a C corporation.
- That corporation creates a new 401(k) plan that can purchase private stock.
- Funds from the existing retirement account are rolled into the new 401(k) plan without triggering a taxable distribution.
- The 401(k) plan purchases stock in the C corp.
- The C corp. acquires or starts a business using these funds.
- The new business is now cash-rich and debt-free
Most retirement plans qualify for ROBS, including: 401(K), Traditional IRA, TSP, 403(b), Keogh, SEP.
The ROBS arrangement allows you to buy almost any legal business or franchise, whether you’re starting a new venture or buying an existing business.
To see if you qualify for ROBS and learn more about this options, CLICK HERE.
Small Business Administration (SBA) loans offer a practical method of small business financing of up to U$5 million, for entrepreneurs looking to start, buy or expand a business. You can use the funds to purchase real estate, cover construction costs or to use as working capital.
Preferred by lenders and small business owners alike, SBA loans promise low interest rates, longer repayment terms and no ballooning costs, making monthly payments manageable for small business or franchise owners. The loans are typically not directly from the SBA. Rather, the SBA encourages banks to lend to small business owners with preferable terms and multiple loan options. In return, the SBA guarantees 75 to 85 percent of the loan for the bank if the loan defaults.
Typically, some of the terms of a SBA loan require the borrower to make a 20%-30% down payment, the borrower to have a minimum 640 credit score, and typically to have some collateral to back-up the loan
Additionally, certain SBA loans can be combined with other forms of small business financing to help you reach your funding needs. In fact, you could even use money from your retirement account to cover the down payment for an SBA loan with 401(k) business funding.
Guidant Financial offers consulting services and packaging assistance for both SBA 7(a) loans and working capital loans.
Many financial institutions are hesitant to offer loans without having some type of collateral — a car, boat, property, etc. But unsecured loans can provide $10,000 – $150,000 in small business financing without personal collateral required from the business owner. What’s more, the funding process is fast — most deals close within weeks.
Rather than relying on personal assets such as a car, boat or home to secure the loan, unsecured lenders look exclusively at a borrower’s credit worthiness to determine eligibility, making those with high credit scores and a long, solid credit history the best candidates for an unsecured business line of credit.
Because there’s no collateral requirement, the approval process is quick and straightforward, making unsecured loans a great option for business owners who need funding quickly. To be eligible, you need a minimum 690 credit score, a credit utilization below 50 percent and a clean credit report with minimal inquiries. Unsecured loans are a great fit for borrowers looking to fund a wide range of project sizes, starting at $10,000.
CLICK HERE to see if you qualify for an unsecured loan.