By: Bryan Uecker, QPA, QPFC, AIF, AIFA
For aspiring entrepreneurs, franchises offer a proven business model, brand recognition, and built-in support systems. But even with these advantages, securing the necessary funding can be a challenge. That’s where Business Owners Retirement Savings Account (BORSA) [more often referred to as Rollovers as Business Startups (ROBS)] plans shine. BORSA plans are particularly well-suited for franchises, offering a unique financing solution that aligns perfectly with the needs of franchisees.
1. A Well-Capitalized Start: Flexible Funding with the BORSA Plan
One of the most significant advantages of utilizing a BORSA plan for franchise funding is the ability to access your retirement savings to invest in your business, providing a strong capital foundation from the outset. Franchises typically require substantial upfront investment—including franchise fees, equipment, and initial operating costs—and the BORSA plan enables you to use your retirement funds to cover these expenses without incurring early withdrawal penalties or taxes.
For some clients, the BORSA plan can provide 100% of the required capital, allowing them to launch their franchise without the need for traditional debt financing. This approach offers the benefit of starting your business on solid financial footing, free from the immediate burden of loan repayments.
However, many clients find that a combination of capital from a BORSA plan and additional financing—such as SBA loans or other lending solutions—offers the greatest flexibility and financial strength. By leveraging both personal retirement assets and traditional financing, you can maximize your available resources, preserve liquidity, and potentially access more favorable loan terms. This hybrid approach is widely recognized in the franchise industry as a strategic way to ensure your business is well-capitalized from day one, while also maintaining positive relationships with lenders and financial partners.
2. Perfect Fit for Franchise Models
Franchises are an ideal match for BORSA plans due to their established systems and support, which can significantly reduce the risk of business failure. This makes them a safer bet for entrepreneurs who are leveraging their retirement savings to fund their venture.
3. Long-Term Growth Potential
Franchises often have a higher success rate compared to independent startups, thanks to their proven business models and brand recognition. By using a BORSA plan to invest in a franchise, you’re not only funding your business but also positioning yourself for long-term growth and profitability.
4. Retaining Full Ownership
Unlike seeking outside investors, a BORSA plan allows you to retain full ownership of your franchise. This means you have complete control over your business decisions while still benefiting from the franchisor’s guidance and support.
Final Thoughts
BORSA plans and franchises are a natural pairing, offering entrepreneurs a way to fund their business dreams with or without debt while leveraging the stability and support of a franchise system. However, it’s important to remember that BORSA plans come with strict compliance requirements and fiduciary responsibilities. Before diving in, consult with a BORSA provider or financial advisor to ensure this strategy aligns with your goals and financial situation. With the right planning, a BORSA-funded franchise can be the perfect path to entrepreneurial success.
