One of the most important pieces to your business ownership strategy is probably the least understood.

If you don’t have a funding strategy in mind or have not taken the steps toward confirming what you qualify for, your exploration of business ownership options will end before it begins. Here’s some things that might help you establish which options you may be able to use in your pursuit of independence from “Corporate America”:

Myth – SBA (Small Business Administration) Loans are restricted due to the economy and some businesses are no longer options (ie: restaurants / gyms) due to pandemic concerns.

Reality – SBA does not restrict by TYPE of business (meaning restaurants / gyms are still options) but you should verify that your preferred franchise direction is on the SBA Directory (meaning they have been validated as viable funding options).

Myth – SBA Loans are difficult to obtain

Reality – SBA loans are not as difficult as you may think, but there are some hurdles to address if you plan to pursue a 7a or Express loan (the most popular for new business investment):

  • Credit score- at least 640 (680+ is far more likely to be approved)
  • It is preferred to have another income source to ease concerns about ability to maintain payments (employed spouse / partner may need to sign on with you if you are unemployed)
  • You will need to contribute 15-20% of the total cost of the loan from your own resources (and usually will need to fund your franchise fee prior to being funded)

There also may be some personal guarantees involved including collateral to back up the loan, but the benefits of the longer terms and reasonable rates (prime + a variable rate) makes SBA loans one of the more popular approaches.

Myth – If I use retirement funds, I’m going to pay a huge penalty for early withdrawal

Reality – Retirement funds are a great opportunity to use your own resources to fund a business and there are programs available to convert your assets into a funding mechanism WITHOUT penalties. One of the better known options for funding a business is called a ROBS plan (Roll-Over for Business Startup). In short, the government allows a conversion of your retirement funds from their current investment strategy into another growth strategy (which would ultimately be your new business). There are some steps required where you will need some help from professionals (for example, setting up a C-Corp with a 401k plan and establishing a process by which the structure of your investment is compliant with government rules), but in short the process is a legitimate way to avoid having to take on a loan if you have enough resources.

Myth – If I can’t get an SBA loan and retirement funds are not an option, there aren’t other funding options available

Reality – Wrong! There are several options that can be viable such as unsecured or secured loans, HELOC (Home Equity Line of Credit – if you own a home with sufficient equity) and a few others (including friend and family support).

Long story short, your funding strategy should be one of the first things you determine if you want to seriously investigate franchise ownership. There are several financial strategy partners I can introduce you to in order to understand what options are best for you and address any of your questions. Knowing how you will be able to fund your dream business will make the whole process of exploration far more enjoyable (and ultimately actionable) when you are ready to move forward.

If you have any questions regarding financing your business, please reach out and I’ll be happy to help you better understand your options.

Shawn Gurn – Certified Franchise Consultant /