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Financing Options for Veterans, Experts Give you the Straight Scoop
Where's the money?
Contrary to what you hear about the trouble in the lending market,
there are still plenty of options when looking into a franchise. We
will explore some different options that veterans have on getting
money to fund a franchising business. There are almost 400 members of
the VetFran program through the IFA (International Franchise
Association), and these members offer anywhere from a 10 to 25%
discount on the initial franchising fee. I would recommend looking at
these companies first because they have lowered the amount you have to
pay initially and see the value that veterans bring to the franchising
company. More than 1,300 veterans have used the program to start a
franchise since they have starting tracking the statistics.
Bottom Line Up Front
From institutions like FranFund to local banks, the money is still
out there. It is just harder to find and to secure once found. Gone
are the days that a good credit score alone will secure a loan for a
veteran. Remember, if approved for a loan from a lender you will most
likely be looking at coming up with 20% of the total amount
yourself. The good thing is that banks are willing to part with money
more easily if you are looking to start a franchise rather than
opening an independent business in the same industry. The reason for
this is that franchising offers a proven system to the franchisees and
the likelihood of success is much greater with a franchise.
Financing Options
First there is a loan through the SBA called the Patriot Express
Loan. This loan is designed specifically for veterans or spouses of
veterans for all branches of service. It will finance up to 85% of the
loan up to $150,000.00. This is a usually great option for veterans as
it requires less initial capital upfront.
The traditional home equity financing that was once preferred is now
harder to secure because of the fall of the housing market. It is an
option, but, you now have to provide some capital to use with the
asset.
There are many companies out there that will buy military pensions
usually for up to 8 years. Most will take 50% of the total amount. For
instance, if you receive $1,000.00 a month, the total you will receive
over an 8 year time span is $96,000.00. These companies will take a
50% cut for giving you the cash now which will leave the veteran with
$48.000.00. Remember this isn't a loan, they are actually buying your
pension for that 8 year time span and it is cash in your pocket that
you don't have to give back.
Some veterans have a 401K or an IRA. This can be used to start a
business as well. It is a very technical process but there are some
companies out there that specialize in making it a smooth process and
will walk you through it for a small fee. This can usually be done
without taking any taxes out of the fund which can be a huge benefit
for a veteran.
Believe it or not there are companies out there that only fund
franchising ventures. This is a great option to look at because they
are usually very familiar with the franchise you are looking at and
can guide you through the funding process. Most are experts in
securing the money and they do this for a small fee to the potential
franchisee.
There are also various government grants and veteran scholarships
from the IFA These are awarded on a case by case basis and this is
something that takes some time to go through the application
process.
Lastly, some franchising companies will finance most or the entire
franchise fee in house if you qualify. They do this for a multitude of
reasons besides making the process easier of getting funds easier.
My Advice
Know that like buying a house, the process takes time and not
everyone is looking to fund right now. But know that not all lending
institutions invested heavily in the housing market so the money is
still out there. Most franchising companies you will work with will be
able to give you great advice on how to go through the process and
some companies will finance some of it themselves if you qualify. The
more prepared you are when facing lenders the better. Know exactly how
much you want, where it will go, and how long it will take you to
break even. Financing a franchise isn't always a one size fits all. Do
your own research to see what the best option for you is.
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