Four Funding Programs to Consider When Exploring Franchise Ownership
Updated: Feb 21
Lending is one of the most important components to buying a business. I'm always looking to provide value to my clients. I have been seeking out professionals to guest blog about their expertise and pass that knowledge onto you. Storm Miller is a National Account Manager for Benetrends, and highly knowledgeable on the subject of funding a franchise.
There are myriad factors to consider when taking that first step into entrepreneurship and exploring franchise ownership: industry, business model, market, competition, etc. Working with an experienced franchise consultant is one of the best ways to help you navigate these often complex waters. Another item that must undoubtedly be considered is how to properly fund your business, rather with cash, debt or even offering equity to financial backers. These waters are best explored with a funding specialist like Benetrends Financial. Benetrends Financial is a consulting firm offering nearly 4 decades funding of expertise that specializes in financing franchise acquisitions across North America. The following are 4 programs worth considering by anyone interested in buying a franchise:
1. The SBA 7A Loan Program
The SBA 7A loan program is the most conventional way to finance a franchise purchase. The 7A is a government-backed, projections-based loan program that is specifically designed for business start-ups but has become almost tailor-made for franchise purchases and allows for funding of projects between $50,000 and $5,000,000. As opposed to applying at 5-10 different banks and hoping that maybe one or two are interested in your franchise project, this program is usually best approached with an SBA specialist. At Benetrends Financial, we offer a free pre-qualification for financing through this program and will connect borrowers with multiple banks that are interested in funding your particular project, ensuring you are seeing the best terms available for funding your project in your market. Securing a commitment from the bank can take anywhere from 40-75 days, depending on the size of your project.
2. ROBS Retirement Plan
The ROBS Program, which stands for rollovers for business start-ups, is another excellent way to fund a franchise purchase. Here at Benetrends Financial, we call this our Rainmaker Plan and as the architects of the program, this is something we have been setting up for franchise owners for over 35 years. As opposed to using cash, this program allows people to use pre-tax retirement dollars – often in an IRA or old 401(k) plan – to fund your business without taxes or penalties. The program involves 4 basic steps: setting up a corporation, designing a brand new qualified retirement plan for the corporation, rolling your retirement dollars into the new plan and investing them into your privately-held corporation. The program is most commonly used to provide cash injections for SBA loans and can be an excellent way to develop multiple locations, territories. Funding typically takes about 20-30 days.
3. Rainmaker Advantage Plan
The Benetrends Rainmaker Advantage Plan is another funding program to consider if you are in a better position to use cash for your project and is yet another program that has been engineered and perfected by Benetrends Financial. It involves a little bit more of a complicated corporate structure but the program is designed to allow business owners to sell their businesses without owing taxes upon the sale of their business. For many, this is a game-changing generational wealth-building tool. For anyone looking to mitigate their tax exposure upon the sale of their business, this revolutionary program is worth the time to explore.
4. Securities-Backed Lines of Credit
For those are considering the sale of stock to capitalize their business, opening a line of credit against their stock portfolio instead could be very advantageous. This program allows buyers to avoid the capital gains taxes associated with the sale of stock and continue to reap the benefits of appreciating stock investments. A bank simply collateralizes the value of the portfolio, offering a line of credit that can be anywhere from 50-80% of the value of the portfolio, depending upon the diversifications of the investments. Interest rates tend to be in the 5-6% range and if the portfolio is generating a stronger return than the debt, borrowers remain in the black.
These are not the only ways to finance a franchise acquisition but are certainly a few programs worth your consideration. For a more in-depth dive into these programs, please do not hesitate to reach out to the funding experts at Benetrends Financial for a free consultation.
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Storm Miller | National Account Manager | 267-328-1709 | firstname.lastname@example.org
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