How to Buy a FedEx route with an SBA loan
Securing SBA financing to purchase FedEx routes is notoriously difficult. Countless buyers, business brokers, and sellers across the country recount similar experiences in which they were led on by a lender for weeks before ultimately finding out that the loan request was denied. Here’s what you need to know to buy FedEx routes with an SBA loan.
There are a number of different reasons that make financing FedEx routes with an SBA loan difficult:
- The routes do not have enough assets available to collateralize the loan.
- FedEx routes have only been eligible for SBA financing for a couple of years, and many lenders and business brokers are not aware of this.
- Very few lenders want to finance FedEx routes and even fewer understand the FedEx business model enough to get the loan underwritten and approved.
- Many sellers refuse to provide the tax returns for the routes.
Despite these difficulties, FedEx routes are eligible for SBA financing and have an extremely low default rate. If you are interested in applying for an SBA loan to purchase FedEx routes, here are some guidelines that you should keep in mind:
- The higher the asking price the better, with loans under $700,000 being more difficult to get financed.
- Sometimes it is okay not to have the tax returns for the routes.
- If the entity on the tax returns contains all of the routes that are being sold, then the lender will require the business tax returns. (i.e. if there are 10 routes in the tax returns, and all 10 routes are being sold, the lender will need the tax returns)
- If the entity on the tax returns contains a set of routes and only a portion of those routes are being sold, then lender will not require the tax returns. (i.e. if there are 10 routes in the tax returns, and only 9 of those routes are being sold, then the lender will not require the tax returns.
- The weekly settlement sheets provided by FedEx for each route are crucial to financing.
- The equity injection requirement will be 20-25% of the purchase price, and can be made up of buyer’s down payment and seller financing.
HOW DO I GET STARTED?
YourSBA.com offers a suite of loan calculators for SBA loans and other funding sources here. You can automatically estimate your down payment requirement, monthly loan payments, SBA borrowing limit, and more.
See if you qualify for an SBA loan by taking just a few minutes to give us some basic information here. The pre-approval process takes less than one day and does not require a hard credit pull.