Question:

After an 18 year career at a major multi-national company I was recently given an “early retirement” from my upper management position. Rather than dust off the golf clubs, I’ve decided to go into business for myself. Franchising seems the best option at the moment, as I’d like to avoid some of the more common headaches involved in a startup operation. My question is, am I better off dipping into my retirement savings and home equity to cover the $200K – $300K in setup costs, or should I look into getting an SBA-backed loan? I have excellent credit, so I don’t think I would have a problem getting the loan, but why incur the financing costs if I don’t have to?

Answer:

Since I’m not a golfer, I agree wholeheartedly with your strategy. Besides, running a successful business is infinitely more enjoyable than golf. You raise an excellent point. From a personal perspective, I prefer to

avoid SBA loans because of the rigid personal guarantees that they require.

I am not opposed to debt because it makes sense quite often to use your capital to grow the business. It really comes down to a personal preference and what the needs of the business may be after you take over. That is why my preference is to

negotiate seller financing where you can obtain more favorable terms, you have the benefit of leveraging your assets and you still have access to your capital to fund the business’ growth.