Financing can make owning a staffing franchise more affordable
When it comes to financing a staffing franchise, there are a litany of ways you can do it. While some financing options may better fit your needs than others, doing your due diligence to understand how each one works and what’s good (or bad) about each option will help you narrow it down to the best choice for you.
Essential Pros, one of the fastest growing staffing franchises in the nation, is highly experienced in helping entrepreneurs realize their dreams of business ownership. After more than a decade in business, our staffing franchise offers several tremendously competitive advantages in the form of state-of-the-art technology and exceptional back-end office support. This allows our franchise owners to focus on what matters most: growing their businesses, driving sales and connecting quality people with quality work.
“Now that we’ve proven the success of the Essential Pros business model can be replicable, I want to help as many entrepreneurs enter the staffing industry as I can,” says Travis Powell, CEO and Founder of Essential Pros. “This is why the barriers to entry are low – because life isn’t about money, life is about doing something that you’re passionate about, day in and day out. In our experience, the average cost to open an Essential Pros business has been less than $150,000 historically. For a first-time entrepreneur, this is an extremely affordable opportunity, and a chance to own a sales-driven business with unlimited profit potential.”
Here is how you can finance an Essential Pros staffing franchise
While Essential Pros doesn’t offer direct access to financing, we do have relationships with third-party lenders who can help make the right financing decision. In the meantime, here are some of the most common ways entrepreneurs can secure the funds necessary to open a new business for you to explore:
U.S. Small Business Association (SBA) lending has made a strong comeback as the economy has improved, and it is much easier to obtain an SBA loan than it was a few years ago. These are government-backed loans at low-market rates, which eliminates most of the risk for banks.
Advantages: You can finance a percentage of the cost of your business, which allows you to conserve cash; the interest rates tend to be fairly low; there is no prepayment penalty; and you can obtain better loan terms once you have a proven track record.
Things you should know: It can take three months or more to obtain an SBA loan, and the loan also requires 100 percent collateral. If most of your collateral comes from home equity, you may want to consider a home equity loan instead.
With a bank loan, the bank will provide you with financing to run your business. This loan will have to be repaid over a period of years.
Advantages: A bank loan is a good way to finance a business as lines of credit are helpful to handle cash flow shortages.
Things you should know: Getting a bank loan can be difficult because the bank’s main interest is getting their money back, preferably through the cash flow that your business generates. Ultimately, the bank will only provide you with funds if your company has a proven track record of success.
Leverage retirement funds tax-free and penalty-free
If you have a 401(k) or an individual retirement account (IRA), it can be converted into a self-directed IRA to fund your business. This financing option became extremely popular during the economic downturn in 2008, when depressed real estate prices eliminated home equity loans as an option for many franchise buyers.
Advantages: Once you set up a self-directed IRA, you can tap into your retirement funds without paying penalties. Since it’s your money, not the bank’s, you don’t have to worry about a long loan approval process. As your business succeeds, you make payments into your retirement account without having to pay interest to a bank. This option also allows you to keep cash in your bank accounts to be available for starting and growing your business.
Things you should know: Your business becomes your retirement plan, which brings risks and rewards. You should be confident that you can beat the stock market by building the value of your business, as well as by avoiding interest payments on a loan.
Advantages: Because credit unions are nonprofit organizations, they do not have to pay state and federal taxes. As a result, they are able to offer low interest rates for qualified borrowers. Additionally, account holders at credit unions are seen as members and not customers, which means that the credit union may be flexible when it comes to its lending policies.
Things you should know: Since credit unions are often small, business owners not only have to qualify for membership, but should also do their due diligence to ensure the credit union offers the lending service they need. Not all credit unions are the same and have their own lending programs and policies in place.
Friends and family
You may have friends or relatives who are willing to invest in your success.
Advantages: They know you, they are typically flexible on repayment terms and they may have expertise that they can offer your business. They may not require collateral.
Things you should know: If the business doesn’t meet expectations, it may strain your relationships. Family and friends may also seek equity in exchange for your investment, which would create a partnership arrangement.