So, you want to elevate your real estate career and take more control of your working life. You’ve researched, ready, and are raring to go with a highly-reputable, successful real estate brokerage franchise like JPAR®.
The only problem is you’re limited financially – and you’re not sure how to fund your real estate brokerage.
The fear of beginning, putting trust in your skills, and creating the needed capital is what keeps most people from leveling up their real estate careers. Don’t let that be you.
This article will walk you through several possible ways to fund your new career to ensure you’re not in the dark, and by the time you’ve finished reading, you’ll be confident in how to take the next step today.
How to Fund Your Real Estate Brokerage Startup
While you do need your own capital when starting, both to prove you can manage the finances and repay your loans, you don’t need to have it all, and many independent real estate brokerages start out funding themselves through different channels.
When you work with a group like JPAR®, we will train, support, and refresh you and your skills. It’s easier to expedite and manage the various tasks involved in starting and running your brokerage.
Let’s look at some common and creative ways of finding those funds so you can buy a franchise.
Loans
Loans are extensive and flexible, and there’s a loan for almost any situation. Finding the right one for you requires a little research – but we’ve done that for you, with helpful financing tips throughout.
Conventional Loan
This one requires quite a bit of capital to start, but it’s also one of the safest with low-interest rates and longer repayment times. Conventional loans aren’t offered by government entities, rather by banks, private lenders, or mortgage companies.
The benefit of borrowing a loan from your bank is that your established relationship will aid your request.
If you don’t want to apply for a bank loan, there are several dependable online services that’ll help you find the right loan for you. We recommend OnDeck. It’s easy to use, reliable, and some of our members have experience using them in the past.
If OnDeck doesn’t feel like the right fit for you, we also recommend Fund My Franchise, which will obtain revolving business credit on your business’s behalf. If you’re looking for quickly available, interest-free capital, you’ll want to visit the SelfStarter loan plan.
Startup Business Loan – Credit Union
Find your local credit union and request information from them for a startup business loan. Credit unions are non-profit and run by their members, unlike banks.
Your local credit union may offer SBA loans or their own loan programs.
Home Equity Loan
If you have equity on your property or home and you’d like to use that to finance your startup, you can apply for a home equity loan. Your equity is the value of your property, minus the amount left to pay on your mortgage.
Obviously, the higher your equity amount, the greater your loan will be. Most lenders will let you borrow up to 85% of your equity.
SBA Loan
The SBA (Small Business Administration) loan is popular with entrepreneurs and independent brokers looking to buy a franchise. It’s endorsed by people who have been in your situation and built themselves to financial and career success.
SBA loans for franchise owners can help cover franchising costs, equipment, and real estate costs, and help build working capital. The SBA itself doesn’t provide the loan – the benefit to finding financing through them is that they essentially back you up to other lenders, who do provide the loan.
There are eligibility reviews you have to go through to be backed by the SBA. JPAR® is listed on SBA’s franchise directory and is willing to include accommodation for an SBA loan in our franchise agreements.
SBA 7(a) Loan
This is one of the most popular SBA loans for franchisees, and their flagship loan program for general financing. You can use this loan for everything franchise startup-related and can borrow up to $5 million.
Repayment time will depend on you and your application, but in some circumstances can extend up to 25 years. Interest rates are either fixed up to 11.25% or are variable up to 8%.
The 7(a) loan often provides you with enough capital to cover all your initial startup costs and gives you a huge step up over independent real estate brokers trying to build a brand from nothing.
SBA Microloan
If you already have some capital worked out for setting up your real estate brokerage franchise, you might want to look at requesting a microloan through SBA intermediaries.
Microloans provide up to $50,000 to small businesses to help get up and running, and cover costs like working capital, stock or product, equipment. You can’t use your microloan to pay existing debts or to purchase real estate.
You’ll need to apply to know if you’re eligible as each SBA intermediary has different loaning requirements, but you will need to have some collateral.
CDC/504 Loan
The CDC/504 loan is also accessed through the Small Business Association’s non-profit partners. It provides you with long-term financing (10 or 20-year repayment terms) and up to $5 million.
There are limitations – the 504 loan can’t pay for working capital, inventory, investing in rental real estate, or repaying debt. However, it can be used to grow your business and buy buildings or facilities to operate out of.
Rollovers for Business Startups (ROBS)
If you have money sitting in your retirement fund you’d like to use but have been avoiding withdrawing for fear of penalties, ROBS is your perfect solution.
ROBS let you withdraw that money tax-free and penalty-free as a method of business financing.
Many first-time business startups prefer ROBS for their flexibility.
To use ROBS, you need to create a new C corporation and set up a new retirement fund for that C corporation. Your existing funds are rolled over and into your newly set up fund, and then used to buy into your C corporation’s stock. These funds from the purchase are then made available to you, and you have access to the money you need to start or grow your new business.
To qualify, you just need a 401(k), a 403(b), or IRA. You don’t have repayments that need to be made or interest to factor in because there is no lender.
You could also go through Fund My Franchise. It usually takes 3-4 weeks, and they charge $4,995 for the 401(k) plan, with a $120 annual administration.
There are pros and cons to using ROBS. The benefit is that, in a way, it’s safer – you’re not using your home as collateral, and you don’t have to provide as much proof like credit score or income as you do to qualify for other financing options on this list.
That’s where the huge benefit to real estate franchising comes into play.
Franchising a business from an established company like JPAR® doesn’t just give you a springboard for your new real estate brokerage business. We offer training, a supportive community of owners, and leaders who have been in your shoes as brokerage owners to help you grow. We have a network of top producing agents across the United States and are consistently growing as both a business and a team.
Partnerships
If you don’t have the capital to set up a business but don’t qualify for funding or don’t want to use the ones you do qualify for, think outside of the box: partnerships.
It’s not rare to see partners working together in real estate – partnering up lets to multiply your time, expand your area and collate funds to launch your business. If you like the sound of partnering with someone you know can bring collateral and relevant experience or knowledge to the table, consider these things very carefully:
- Do you trust them?
- Will you work well together?
- What percentage of ownership will you each have?
- Do you think they’re capable of helping you make big, business-altering decisions?
- Do you think they can handle the responsibility?
- Are they in this for the long haul?
- Would you be able to trust them to make decisions if you couldn’t?
- Do they understand the costs involved in buying a franchise?
Work alongside an attorney to write up paperwork that protects you both and protects the business.
Crowdfunding
Something you may not have considered is crowdfunding. It’s a new approach to financing your business, and instead of one investor lending you a large sum of money, you’ll have several smaller investors.
Real estate is a network. If you know agents who are producing clients and sales to a level you aspire to reach, bringing them in as investors will open up doors for you. It’ll be in their best interest to advocate for you, teach you tricks they’ve learned over the years, and help with your funds.
The benefit for your lenders is safety and security, and the benefits for you are that you may not have to put up the collateral or apply for large loans from private lenders or banks.
Set up Your Real Estate Brokerage Franchise With JPAR®
By now, you should have an extensive list of options for finding ways to finance your real estate brokerage franchise. When you work with JPAR®, you’re buying into an opportunity to grow with a reputable brand that is climbing its way up in the real estate industry.
Take control of your life and turn your business-owning dreams into reality. Reach out to us today and let us guide you through the process of becoming a successful business owner.
