How to Finance a Chem-Dry Carpet Cleaning Franchise
Financing can make owning a carpet cleaning franchise more affordable
Thousands of entrepreneurs start businesses every year. Although the businesses may be different, they all share one commonality: they need money to finance their company. There are a myriad of ways to finance a business and some may better fit your needs than others. Doing your due diligence to understand how each one works as well as what’s good (or bad) about various financing options will help you narrow it down to the best choice for you.
Chem-Dry, the world’s largest carpet cleaning company, is highly experienced in helping entrepreneurs realize their dreams of business ownership. As a home-based business opportunity, Chem-Dry is committed to keeping ongoing costs low, beginning with our initial investment and continuing with our straightforward business model. With our robust training and ongoing support infrastructure in place, we provide our franchise owners with the resources they need to grow their businesses.
“At Chem-Dry, we understand that cash is crucial in the first few months of any new business,” says Doug Smith, Senior Vice President of Franchise development at Chem-Dry. “This is why we offer in-house financing up to 40% on the initial license fee and the loan is interest- and payment-free until the fourth month of operation. We’ve worked really hard to ensure Chem-Dry is an affordable investment. The fact that we offer a simple business model that’s easy to scale and allows our franchisees to benefit from endless revenue opportunities by selling add-on services really positions Chem-Dry as a brand with strong growth potential going forward.”
Here is how you can finance a Chem-Dry franchise
While Chem-Dry doesn’t offer direct access to financing, we do have relationships with third-party lenders who can help make the right financing decision. In the meantime, here are some of the most common ways entrepreneurs can secure the funds necessary to open a new business for you to explore:
U.S. Small Business Association (SBA) lending has made a strong comeback as the economy has improved, and it is much 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, which allows you to conserve cash; the interest rates tend to be fairly low; there is no prepayment penalty; and you can obtain better loan terms once you have a proven track record.
Things you should know: It can take three months or more to obtain an SBA loan, and 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.
With a bank loan, the bank will provide you with financing to run your business. This loan will have to be repaid over a period of years.
Advantages: A bank loan is a good way to finance a business as lines of credit are helpful to handle cash flow shortages.
Things you should know: Getting a bank loan can be difficult because the bank’s main interest is getting their money back, preferably through the cash flow that your business generates. Ultimately, the bank will only provide you with funds if your company has a proven track record of success.
If your business needs new equipment or technology, but you can’t afford it, leasing may be an option to consider. For instance, Aztec Financial, a commercial equipment financing company offers flexible and affordable leasing options, which allows new business owners better cash flows and helps spread out the cost of large business purchases.
Advantages: Leasing your equipment for your business means that you may not only be required to pay a significant down payment, but you could also have a lower monthly payment.
Things you should know: Leasing requires that you pay interest, which adds to the overall cost of a machine over time. Moreover, some lenders require a specific period of time as well as mandatory service packages. This can add to the cost if the lease term extends beyond how long you need the equipment.
Leverage retirement funds tax-free and penalty-free
If you have a 401(k) or an individual retirement account (IRA), it can be converted into a self-directed IRA to fund your business. This financing option became extremely popular during the economic downturn in 2008, when depressed real estate prices eliminated home equity loans as an option for many franchise buyers.
Advantages: Once you set up a self-directed IRA, you can tap into your retirement funds without paying penalties. Since it’s your money, not the bank’s, you don’t have to worry about a long loan approval process. As your business succeeds, you make payments into your retirement account without having to pay interest to a bank. This option also allows you to keep cash in your bank accounts to be available for starting and growing your business.
Things you should know: Your business becomes your retirement plan, which brings risks and rewards. You should be confident that you can beat the stock market by building the value of your business, as well as by avoiding interest payments on a loan.
Advantages: Because credit unions are nonprofit organizations, they do not have to pay state and federal taxes. As a result, they are able to offer low interest rates for qualified borrowers. Additionally, account holders at credit unions are seen as members and not customers, which means that the credit union may be flexible when it comes to its lending policies.
Things you should know: Since credit unions are often small, business owners not only have to qualify for membership, but should also do their due diligence to ensure the credit union offers the lending service they need. Not all credit unions are the same and have their own lending programs and policies in place.
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 and they may have expertise that they can offer your business. They may not require collateral.
Things you should know: If the business doesn’t meet expectations, it may strain your relationships. Family and friends may also seek equity in exchange for your investment, which would create a partnership arrangement.
Founded in 1977, Chem-Dry is the world’s leading carpet and upholstery cleaning service with a network spanning over 55 countries and serving over 11,000 homes and businesses a day worldwide. Its green-certified core cleaning solution and proprietary Hot Carbonating Extraction cleaning process provide a deeper clean, allow surfaces to dry faster, and leave homes and workplaces healthier. In addition to being ranked the number one carpet cleaning franchise by Entrepreneur magazine for 32 consecutive years and ranked among the top 25 concepts in the magazine’s list of Top Low Cost Franchises for 12 consecutive years, Chem-Dry has also been ranked as the world’s Best House & Office Franchise in the 2018 Global Franchise Awards. For more information about Chem-Dry and to find a local operator, visit www.chemdry.com, or for more information on franchise opportunities, visit www.chemdryfranchise.com. Chem-Dry is a member of the BELFOR Franchise Group family of brands.