Fund Your Business
How will you fund your business? Developing a funding plan is an important step as you consider business ownership. We recommend that you address this early in your search, similar to becoming prequalified for a home purchase. Our funding partners offer expertise in business purchases and provide professional service and competitive rates. They will work with you to put together a personalized assessment to help you decide on how to approach your purchase. Following are several alternatives that are available.
For more detail, review a guide from one of our funding partners – Funding Strategies Guide.
Use Your Retirement Funds – Free of Taxes and Penalties
The Rollover as Business Start-up (ROBS) program allows buyers to use retirement funds to start or buy a business with no debt, penalties or taxes. Because this is not a loan, you may accelerate business profitability as there are no payments or interest. This allows you to use your own money directly in your business to achieve positive cash flows.
Other advantages:
- Quicker path to funding – often in 2 weeks
- No minimum credit score required
- Funds may be used to pay yourself a salary from the start
- Can be used for cash injection for other funding sources such as SBA
SBA Loans
The SBA (Small Business Administration) offers a loan guarantee for up to 90% of the loan amount to qualified borrowers for qualified purchases. This makes offering the loan less risky to the lenders. Loans are also made at attractive rates and terms to the borrower, making them a popular source for funding a business.
SBA loans are available for small and large business purchases and also for working capital. We work with many franchises and business opportunities that are on the SBA approved registry, which streamlines approval.
The SBA loan process is complicated and our funding partners provide an analysis before applying, and also support borrowers all the way through the process. Funding of SBA loans may take 60-90 days.
Unsecured Lines of Credit
If you have good credit, an unsecured business loan may be used to fund all or part of your business purchase. Since this is a line of credit, you only pay when you access the credit line. Introductory interest rates may be low, making this a good source for short term business funding.
The loan process for an unsecured credit line is streamlined. No collateral is required. Often times the application and funding can take less than 3 weeks.
Home Equity Lines of Credit
Home Equity Lines of Credit provide funding based on using home equity as collateral, so your home must be worth more than you owe. These loans are a relatively low cost method of funding. Depending on your credit score, interest rates can be lower than traditional lending. As a line of credit, you only pay or accrue interest when you access the credit line.
Securities Backed Lines of Credit
If you own stocks, bonds, mutual funds or other eligible securities, these can be used to secure a Securities-Backed Line of Credit. This is similar to a home equity line of credits, except that the securities in your portfolio are used as collateral. You do not need to sell any of your assets, keeping your investments in place.
Securities backed lines of credit are normally funded quickly, and have low interest rates. Some credit lines have interest-only payments available.