Using a Friend or Family Loan? Tread Carefully
From time to time we encounter route buyers who intend to use a loan from friends of family to cover the cost of their route purchase.
A couple things to keep in mind if you are considering this option:
Friends and family helping to finance your business may want equity in the business; consider if you are open to this and what that arrangement may look like. Remember: partnerships are like marriages. Think carefully before entering into an arrangement.
Personal loans may be more flexible in terms of the payback terms.
Friends and family may be able to make money available to you quickly.
If things go south with your business/investment, you may have to continue seeing that person (across the holiday table, at the neighborhood block party, etc.).
Generally, personal loans are not personally secured. Your friends/family may not have easy recourse (such as confiscating your existing assets) if you were to fail to make timely payments.
Alternative: Seller Financing
If you aren’t sure about loans from friends and family, but you are looking for a way to minimize debt payments, remember you can seek seller financing options.
Important Tip: Seller financing is a loan from the seller of the route you are purchasing. If you can get the seller to agree to seller finance a portion of the purchase price, then the bank will view that seller financing as part of your down payment.
For example, if you are purchasing a route business for $1,000,000, your down payment requirement might be $250,000 (or 25%). If the seller agrees to finance $100,000 of your route, then you only have to submit $150,000 as a down payment to the bank.
Be cautious about multiple finance sources, if you leverage more than 80% of your business, debt payments are substantial. You have to be careful as a buyer if you leverage most or all of the route business: your margins for error are a lot thinner.
We keep a running list of routes for sale open to seller financing arrangements. And routes not on this list may still consider seller financing for the right offer. Talk to our team for more details.
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.