First things first: Financing = Leverage = Debt
There are more precise ways to describe each of the above terms. But in general, when we talk about financing your route purchase we are talking about leveraging a business and taking on debt.
For example, if you plan to purchase a FedEx Ground route for sale that costs $1,000,000 (and you intend to finance a portion of it), your finance source is going to require a down payment.
Typically, your finance source will require a down payment of 20% or more. With a 20% down payment you lever your business 4:1. You have 1 part down payment and 4 parts debt.
That is actually okay! Don’t be afraid of using debt/leverage to buy these businesses. These FedEx routes for sale can sustain a higher debt load than what some other businesses allow. Why?
FedEx Ground routes come with assets (P&D and linehaul trucks) that the banks view as collateral. Banks love having something they can get their hands on and are more willing to allow businesses like these to lever their business at a higher ratio.
We know from the history of the routes what to expect financially and there aren’t many variables that dramatically alter monthly cash flow.
More importantly, however, FedEx Ground routes have predictable cash flow. We know from the history of the routes what to expect financially and there aren’t many variables that dramatically alter monthly cash flow.
For example: a restaurant business is incredibly susceptible to uncontrolled variables such as reviews, changing taste palettes, and the “cool” factor. Conversely, the sending and receiving of packages marches forward with astonishing consistency.
Recession-resistance in FedEx Ground Routes
While no business is completely recession-proof, FedEx Ground routes are insulated from economic downturns and we refer to FedEx Ground routes as recession-resistant.
E-commerce growth is at 20-40% per year in most markets. That number may slow or remain flat in a recession, but it is not likely to dip into the negatives during a recession. Because of that protection, FedEx Ground route profit margins are better shielded than many other businesses.
If you know you will want or need to finance your FedEx Ground route business, let’s look at what to expect from potential finance sources:
If you need one-on-one support to understand appropriate levels of leverage for you business, connect with our team.
Please note: our team does not provide financing, but we do provide guidance about the process of buying a FedEx Ground route for sale. We can help you better target a listing that will meet your financing and monthly cash flow goals. We can also help you evaluate the financials of a route for sale. Finally, we have a network of lenders that provide financing and we can help direct you to the right lender for your specific needs.