Businesses may fail for many reasons, but being over-capitalized is not one of the reasons
When considering franchise ownership, few activities will have as much of a long-term impact on your business as obtaining adequate financing. Cash is king in a new business, and it is advisable to over-capitalize
Going into business with your spouse or partner can be a lucrative and rewarding experience that strengthens your relationship. If you’re in a long-term relationship, you already know that teamwork is of the utmost importance. The need for teamwork is especially important when determining the funding strategy for your new franchise or small business. Starting at square one can be overwhelming, but there are several ways for you and your partner to get the capital you need.
A ROBS 401(K) Rollover
A ROBS 401(K) Rollover – also known as Rollover for Business Startup – allows you to use your qualified retirement savings. If you think about it, which part of your balance sheet is not retirement savings? ROBS plans are tax-deferred and penalty-free. If you have a 401(k) from a previous employer or an IRA (or any other qualified fund), and you plan to work hard to make your business a success, this is a great way for you and your partner to grow your nest egg for your actual retirement. FranFund offers a full-service, on-site Third Party Administration service, and we have significant experience administering plans for couple-owned franchises.
SBA Loans
SBA loans were created by the U.S. Small Business Administration, specifically to incentivize lenders to first-time business owners. The bank is provided with a guarantee for a portion of the loan, but the borrower must still meet the credit criteria outlined by the lender. SBA loans are a great solution for married couples who have each established good credit, because collective finances are considered by the lender.
A Home Equity Loan
A home equity loan – or HELOC (Home Equity Line of Credit) – allows you and your partner to use the equity you’ve built up in your home to fund your business. Depending on whether it is a second mortgage or simply a line of credit, this type of loan provides you with funds that can be used to purchase an existing business, as an equity injection for a loan, or as working capital once your business is open.
Regardless of which funding strategy you and your partner choose, it’s critical to make an informed and collaborative decision. You are in this together!
– Sherri Seiber, Chief Operating Officer for FranFund
FranFund: FranFund designs flexible funding plans that help new and experience business owners fund their franchises. We have a powerful and accurate pre-approval process. Our former bankers analyze a candidate’s financial situation the same way a lender would, and we have a 99% success rate in obtaining loans for borrowers who received FranFund pre-approval! We offer ongoing support and make sure our clients know all of their options for funding single units through multi-unit expansions including SBA loans, conventional lending, and retirement plan funding with a risk-free SafetyNet® option. For more information, contact Sherri Seiber: sseiber@franfund.com