If you’ve never owned a business before, it might seem intimidating to secure the capital necessary to get your franchise off the ground. Even a low-cost franchise investment might require some creativity on the part of the franchisee when it comes to gathering initial startup funds. An AEON franchise, for example, requires about $65,900 in investment capital.
Thankfully, there are a variety of financing options that could work for just about any situation. Are you a veteran? There’s an option for you. Have a hefty retirement account that you’d love to put to good use now? There’s an option for you. Not a desirable candidate for a commercial bank loan? There’s an option for you.
Regardless of which type of loan you choose to utilize, there are a few pieces of information that they all require. When you decide you want to open your telecom franchise, you’d be smart to compile the following information so you’re ready when the time comes to start the lending process:
- Your personal credit score
- Financials including your balance sheet (assets and liabilities) and income statements
- Business plan
Once you have your ducks in a row, here are four types of loans that can help you finance your telecom franchise:
ROLLOVER FOR BUSINESS STARTUPS (ROBS)
Utilizing a Rollover for Business Startups, or ROBS, you can use money from an eligible retirement account, including a 401k, to invest in your new (or existing) business without paying any penalties or taxes. This option is especially appealing because it’s not like a traditional loan where you will be incurring debt that would need to be repaid. Since you are using money from your retirement savings, you will want to feel confident that you can see a fairly quick return on your initial telecom franchise investment. AEON is a one-of-a-kind IT franchise opportunity that offers residual income in perpetuity due to its business model based on recurring monthly services.
SBA stands for Small Business Administration. As its name implies, this type of loan is partially guaranteed by the government so if a borrower does default on his or her SBA loan, the lender doesn’t lose as much money as it would otherwise. This fact makes the SBA loan a lower-risk option that’s easier to secure. Additionally, SBA loan interest rates are capped based on the prime rate. According to the Wall Street Journal, “about 10% of all SBA Loans go to franchisees,” making this a viable option for financing your telecom franchise.
HOME EQUITY LINE OF CREDIT (HELOC)
A home equity line of credit, also known as HELOC, is different than your standard home equity loan which is a one-time lump sum paid off over time. As Entrepreneur defines it, a HELOC “works more like a credit card because it has a revolving balance. Interest is due on the outstanding balance and that rate may vary over time.” Because this type of loan is so closely connected to interest rates, you will want to feel sure that your business is strong enough to sustain any rate jumps. In many cases, though, this type of loan may cost you less (in terms of interest) than other types of loans and is a good option for anyone looking to finance their telecom franchise in the midst of a rising home values.
SBA EXPRESS LOAN
With an SBA Express Loan (similar to the popular Patriot Express Loan that ended its run in 2013), “veterans can take advantage of the accelerated application review and have a turnaround of 36 hours” (Fundera). It really is an express loan! This type of loan is available to veterans and other small business owners and provides them with up to $350,000 in funding. It works like the regular SBA loan, connecting borrowers to potential lenders all with the backing of the Small Business Administration. The SBA Express, however, is a fast business loan making it a great option for those franchisees who want to shorten the timeline between their initial telecom franchise application and opening day.
One of the major benefits of franchising in an industry like telecommunications is the low startup costs and overhead associated with this type of business. To learn more about why an IT services franchise like AEON is one of the smartest business decisions you can make, fill out a quick form and someone from our team will be in touch soon!