One of the most common concerns of those looking to invest in their own franchise is how they will get the necessary funding. That’s why FranNet has partnered with Benetrends Financial in order to help prospective entrepreneurs get the start-up dollars they need to make their franchise dreams a reality.
The business community in general took a hit with the financial downturn in 2008 but it might surprise you to learn that today there are more funding options for franchise funding than ever before.
The two main products for franchise funding are rollovers of business start-ups and SBA loans.
SBA 7A Loan Program
This is a government backed loan and tends to be the most common type of SBA loan for franchisees. While the maximum loan amount is for $5 million, however Benetrends actually has a special program for SBA loans that are between $50,000 and $150,000.
The maximum rate for such as loan is 6% however the rate usually offered will be prime plus 2.75%. For an investor looking to get this type of loan on their own, it will usually take between 30-60 days to be approved, however Benetrends often sees loans for their clients approved within 24-48 hours for loans under $150,000.
What are lending banks looking for?
Clearly, in order for a potential franchisee to receive a loan, they must meet certain criteria. A written business plan and strong personal credit are a must. Applicants should also include their resume including their transferable management skills, three years of previous tax returns, and a personal financial statement.
A down payment or “equity injection” of 20-30% is also typically needed. Finally, the business plan should demonstrate sufficient cash flow to cover 125% of the global debt service.
Applying to the right lender
One thing many new entrepreneurs often don’t consider when they are applying for a loan is whether or not their particular business is a good fit for that lender. For example, someone may have an excellent business plan for an e-commerce business, but if they go to a bank that prefers brick and mortar businesses, chances are they won’t get approved.
It is therefore important to do a little bit of research on the lender before applying for the loan. This is where Benetrends can be of real service. With Benetrends, you’ll have the following benefits:
- A fee will not be requested from you until they have reviewed your information and are confident that they can obtain the loan you need.
- Loan approval is guaranteed or your fee is refunded.
- Your loan application goes to multiple suitable lenders simultaneously in order to create the chances of a “bidding war”. This ensures you are able to get the best possible rates and terms for your loan.
401k Rollover Funding
Another strategy for franchise funding is 401k rollover funding. This is one of the most popular means of funding for people starting new businesses.
As you may be aware, if you were simply to pull money out of your 401k, it would result in considerable losses in the form of early withdrawal fees and state and federal taxes but if you were to simply change employers, the entire account can be transferred without penalty.
The rollover works on this concept. Benetrends can help clients rollover their 401k by helping them establish a corporation with a customized retirement plan. The 401k is then rolled over into the new corporation’s plan and purchases stock in the corporation – thereby freeing up capital to start your new franchise.
Benetrends has a proven track record in helping clients with 401k rollovers and has never had a plan disqualified by the government.
The advantages of this type of funding are:
- Invest retirement funds without taxes or penalties.
- Plan is safe and proven
- Use pre-tax dollars
- Improve cash flow and gain business equity
- Funds can be used to receive a salary
- Start business with less debt and interest payments
- Funding can be secured within 2-3 wees.
- Can be used in combination with an SBA
If you’ve decided that franchising is for you, we strongly recommend that take some time and learn the types and amounts of funding that you will qualify for. This will help you to know what franchises you can afford and save you a lot of time and effort that might otherwise be spent on researching franchises that are out of your price range. FranNet recommends working with Benetrends for good reason – they are second to none in customer service and in results.
About FranNet NJ NYC
FranNet of New Jersey and New York City has several franchise experts to help you explore the world of franchise ownership. At FranNet, we provide no-cost guidance, information and support to individuals who are interested in purchasing a franchised business. We are experts in helping our clients evaluate the various types of franchise opportunities in the marketplace today. Our goal is to not only help entrepreneurs’ dreams of business ownership come true, but to help people make sound business decisions that give them the best chance for future success. For more details visit – http://www.franchise-njnyc.com/