Ready to Invest in Your Future? We’ve Got Some Ideas.
The total investment to open a new AAMCO auto franchise can range from $234,800 to $353,200. This figure includes a $39,500 franchise fee. It also covers the costs for equipment, training, and leasing a property. We offer several franchise financing options that make it possible for us to partner with the most passionate owners in the industry. Here are financing options and other popular options to consider:
1. Home-Equity Loans
If you’ve owned a home for many years, there’s a good chance you can get a home equity line of credit (HELOC). You could also ask your banker about a home equity installment loan (HEIL) to finance your business.
- Advantages: They usually have a very low interest rate. HELOC’s are highly flexible and sometimes have no specific repayment schedule. They don’t require a lot of documentation and can provide more flexibility for your business.
- Considerations: You’ll need to show enough income to repay the loan through your existing sources of income. Projected earnings as a franchise owner won’t count toward your ability to repay. A real estate appraisal will be required to establish your home’s value.
2. Leverage Retirement Funds
A 401(k) or an individual retirement account (IRA) can be converted into a self-directed IRA to fund your business. It’s your money, so there are no bank interest charges. This alternative could be the right franchise financing option for you, especially if real estate prices are depressed.
- Advantages: Once you set up a self-directed IRA, you can tap into your retirement funds without paying penalties. You don’t have to worry about a long loan-approval process. As your business succeeds, you can repay your retirement account. With a self-directed IRA, you can keep cash in your bank accounts for starting and growing your business.
- Considerations: Your business becomes your retirement plan. This can bring both risks and rewards. You may or may not beat the stock market by building the value of your business. You will, however, avoid interest payments on a loan.
3. SBA Loans
U.S. Small Business Association (SBA) lending has made a strong comeback. It can be easier to obtain an SBA loan than it was a few years ago. These are government-backed loans at low-market rates, which eliminates most of the risk for banks.
- Advantages: You can finance a percentage of the cost of your business. This will allow you to conserve cash. The interest rates tend to be fairly low. There is no prepayment penalty. You can obtain better loan terms once you have a proven track record.
- Considerations: It can take three months or more to obtain an SBA loan. The documentation process is extensive. The loan also requires 100 percent collateral. If most of your collateral comes from home equity, you may want to consider a home equity loan instead.
4. Friends and Family
You may have friends or relatives who are willing to invest in your success.
- Advantages: They know you. They are typically flexible on repayment terms. Friends and family may have expertise that they can offer your business. They may not require collateral.
- Considerations: If the business doesn’t meet expectations, it may strain your relationships. Family and friends may seek equity in exchange for your investment. You would need to create a partnership arrangement.
Partnerships can allow two or more people to combine their resources to purchase an AAMCO franchise. If partners complement one another’s skill sets and add value to the business, it can be a great arrangement.
- Advantages: You can split management and leadership duties. This gives you greater capacity and flexibility. You’ll have multiple people to oversee operations and marketing, so you may be able to grow faster.
- Considerations: Partners must have clear guidelines for who handles what. Profits need to be clearly divided. To get the most out of your partnership and avoid disputes, clear communication and a shared commitment is essential.