While cash is always king, there are some financing alternatives available for many investors wanting to start their own business:

• With good credit and a strong net worth, some franchisors will finance a portion of the franchise fee and equipment costs.
• With good credit and a strong net worth, some franchisors will provide a loan for a portion of the initial investment through an affiliated finance company.
• A bank loan guaranteed by the SBA (Small Business Administration) may be available. The SBA guarantees certain business startup loans up to 90% of the loan amount on attractive terms. We can provide you with additional information. See: Small Business Administration-SBA Loans.
• Many buyers are utilizing 401 (k) or IRA rollover funds to acquire a franchise. This involves reallocating your investments from your current holdings to your own company. See: Acquire a Business with Self-Directed IRA and 401k Accounts.
• Today, many investors are using the proceeds of a Reverse Mortgage to acquire a franchise or new business. Investors that are age 62 or greater may qualify for a loan that carries no monthly payments until their house is sold. See: Reverse Mortgage Loans-Buy a Franchise or Existing Business.
• Another common option is to obtain a home equity loan. This can be a standard home equity loan or a home equity line of credit.
• For certain types of business, the principals of Pacific Business Advisors may provide a portion of the initial investment. Call for information.

The business broker consultants with Pacific Business Advisors can assist you in comparing the various alternatives available. There is no cost for a consultation.

 

Mezzanine Debt

Mezzanine debt is a type of hybrid debt that is subordinate to other debt. It is frequently associated with acquisitions, mergers and buyouts. Mezzanine debt is often long term debt with flexible repayment terms. The loans often provide the lender with warrants or options.

 

Private Money - Private Money Lenders

Private money refers to loans made to individuals, companies, and other entities by non-institutional individuals or private lenders. These loans normally carry higher interest rates than institutional loans made by banks, credit unions, and insurance companies because these institutional lenders generally have more stringent underwriting requirements. Private money lenders generally rely more on the asset value of collateral and less on the credit rating and/or the cash flow or income of the borrower.

 

 

Evergreen Loans

An evergreen loan is a revolving line of credit requiring the borrower to pay only monthly interest. The principal is expected to be made at the end of the loan term which is usually two to three years from the effective date. These loans are regularly extended by the lender at maturity making them long term loans.

 

 

Advantage to Buying a Franchise

Franchise Disclosure Document (FDD)

Sample FDD Table of Contents

What is a Franchise?

Credit Enhancement