When we say conventional financing we mean receiving a business loan from a local or national bank or credit union. This is opposed to buying a FedEx route for sale with an all cash offer or using a Small Business Association (SBA) loan.
Why should you consider conventional financing for your FedEx route purchase?
Conventional financing terms typically have lower interest rates than SBA loans.
The loan approval process at a local or national bank is faster (30 days or less) than the SBA loan approval process.
The fees (particularly the origination fee) are dramatically less costly than SBA fees.
If you have a house or car loan with the bank, you may be more likely to receive approval.
Why might conventional financing not be a good fit for your business?
For approval, you must have an excellent credit score and a solid personal financial statement.
Your loan terms will likely require a 5-7 year amortization schedule (whereas the SBA may allow a 10 year repayment plan).
Conventional financing will most often require a 25% minimum down payment.
The Impact of Amortization
Think the loan schedule doesn’t make much difference? Look at how dramatically an amortization schedule may impact your monthly payments:
Let’s say you buy a route business for $500,000 with $125,000 down (25%). So, you are financing $375,000 for your route purchase.
Loan @ 7% interest over 5 years, monthly payments: $7,425 ($70,527 in interest*)
Loan @ 7% interest over 7 years, monthly payments: $5,660 ($100,419 in interest*)
Loan @ 7% interest over 10 years, monthly payments: $4,354 ($147,488 in interest*)
*over the life of the loan
Deciding on the best way to finance your route purchase (and on your target route price) is a critical piece in this process. Need help analyzing the numbers more?
Talk to our team for additional guidance or to find the right-fit FedEx route for sale.
Please note: our team does not provide financing, but we do provide guidance about the process of buying a FedEx 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.