The Franchise Informant | How to Finance Your NPI Franchise

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How to Finance Your NPI Franchise

HOW TO FINANCE YOUR NPI FRANCHISE
 December 20, 2018 |  Business Tips, Franchise |  money management, entrepreneur, small business

By Shauna Nilsen, NPI, Inc.'s Recruitment Coordinator

You’ve talked to an NPI franchise sales rep, read through the FDD and decided that you want to start a home inspection franchise. There’s one snag in the plan, though: start-up capital. Before you get discouraged, you should know that there are plenty of options out there to finance your business. It takes some searching to find the one that will work for you, but we’re here to help! Here are some of the best ways to get a loan that’ll get your new franchise up and running.

Traditional Bank Loan
This is the first place entrepreneurs who are just starting out go to secure financing, and works well in the right situation. The ideal bank to request a loan from is one you already do business with—they’ll have a ready-made financial history to work from, which can shorten the process.

If the bank you’re working with offers small business loan options, they’ll ask you to fill out a loan application, which can sound daunting if you’ve never encountered one before. Don’t sweat it, though—you’ll just have to have certain information regarding your business, including the legal structure, what services you’re selling, and personal financial information to ensure you’re in good standing with your state (ie., that you’ve been paying your taxes).

The most important thing is to have realistic expectations about your odds of being funded with a traditional bank loan. Recently, banks have been wary about lending money to small businesses, so if you’re denied here, don’t give up!

SBA Loan
If you find you can’t get funding from a traditional bank or credit union, your next stop should be the Small Business Administration (SBA) Loan Program. The SBA helps entrepreneurs find financial support from a select group of lenders by backing the loans they administer—this extra level of security provided by the Federal government reduces risk for lenders and helps you access capital.

SBA loans do come with a few hoops to jump through, but they can be very worth it. For instance, you may be required to attend education courses as a condition of the loan, but SBA loans also come with perks like lower down payments and lower interest rates.

To be eligible for an SBA loan, you must be legally registered as a “for-profit” business, plan to operate in the U.S., and have invested your own time or money in getting your business off the ground.

HELOC
Homeowners can often find a source of business financing through a Home Equity Line of Credit (HELOC). A HELOC differs from a standard home equity loan—instead of a lump sum upfront, HELOC works like a credit card with a revolving balance. You pay the outstanding balance on your line of credit monthly, with a variable interest rate.

Interest rates on a HELOC tend to be lower than loans from other sources, and as long as your home has risen in value, it’s easier to open a line of credit than borrow from another type of lender.

The power of a HELOC for starting a business comes from having a relatively stable interest rate and increasing home values, which is another way to say that HELOCs are best used in a strong economy.

401k Business Financing
You can use your retirement savings to start your business. By utilizing your eligible 401k, you can avoid the headache of an interest-bearing loan and start off debt-free. This helps your business get up to speed and turning a profit faster. There are other benefits to this method, as well—using funds from your 401k doesn’t trigger tax penalties or fees, you won’t need collateral to secure your funding, and it’s a relatively fast way to access your capital (around 3 weeks in most cases).

The downside to 401k business financing is that it can be complicated to set up. You’ll likely need the help of your financial advisor to make sure every step is followed correctly.

Keep in mind: National Property Inspections, Inc. isn’t a lender or financial advisor, so we recommend doing your research to find the lending option that’s right for you. We work with a wide variety of lenders that have been very successful in securing funding for our franchisees, so if you’re not sure the best way to go, contact us to discuss your options. We’ll put you on the right path to funding your franchise!

 

Ready to start your home inspection business with National Property Inspections?
Visit npifranchise.com for more information, or call 1-800-333-9807, ex. 24.

 

About the Author
Shauna Nilsen, Recruitment Coordinator
Shauna has 12 years experience in research and development of policies and procedures, and training manuals. She started at NPI in our National Accounts department, assisting with placement and follow-up of all inspection orders and invoicing. Shauna now works with NPI's Director of Recruitment to onboard new NPI and GPI franchisees.


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