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August 9, 2022   /   K. Lee Graham

Prepare these documents to get ready for your FedEx SBA loan application.

Using SBA loans to buy a FedEx Route could be a good option for entrepreneurs who want longer-term, business-friendly loans to finance their purchase.

SBA loans typically have less strict collateral requirements than conventional business loans. They can be a good fit for the FedEx route business model since route ownership is not a business that requires an excessive amount of assets that can be counted as collateral.

FedEx route owners also tend to appreciate that the longer terms of SBA loans result in smaller monthly payments. That’s more capital to invest in the business month to month, without paying a premium on your interest rate.

One drawback of SBA loans is that they do require more paperwork than conventional loans and a longer timeline for funding. It’s a trade-off for securing a government-guaranteed loan’s great benefits.

Starting your documentation collection early can help expedite the process and keep it manageable.

Focus on preparing these 5 documents to get ready for an efficient loan application.

1.      Business Plan with Resume

Your Business Plan is one of the first documents a lender will look at when determining your loan eligibility. If you want to make the best first impression and help organize yourself for success throughout the application process, make sure your Business Plan is top-notch by using our business plan resources in this article.  

Get started by downloading our free business plan template for SBA loan applications. Tailor it to address a few key details lenders need to see to determine your SBA loan eligibility.

First, address your transition plan for the business. Buying a FedEx route is viewed as a business acquisition. You’ll need to provide details about the transition of ownership to help your lender understand how you plan to manage the route once it’s yours. Identify the exact route you wish to purchase in your business plan, if possible.

SBA loan applications also require you to detail your management experience in your Business Plan. The SBA loan program is not intended to support businesses that are passively managed, so lenders will want to see applicable operational and managerial experience from prospective borrowers.

Include any management experience you or your team members have in this industry, or others. You can include experience in logistics, staffing and recruitment, management of teams or finances, etc.

The official Request For Information (RFI) you’re required to send to FedEx will include a lot of the information you’ll need to add to your FedEx route business plan for an SBA loan application. Keep it on hand to help you write your Business Plan.

2.    Financial Projections for the FedEx Route with Written Assumptions

Lenders want to see how the business will grow under the new ownership. The Financial Projections are a prediction of how much money you’ll bring in each month, how much you’ll spend each month, and the profit you turn based on both factors.

You’ll need three (3) years of financial projections. Break down your first year of the business month by month. The other two years can be annualized projections. All 3 years will need to have written assumptions discussing future revenues and expenses you provide in the projections.

Lenders will look for these explanations of your calculations written out as ‘assumptions’. This part is particularly important for SBA loan applications. You’ll need to explain how you’re determining hypothetical numbers to use in calculations so that your SBA lender can help make sure the projections are reasonable.

3.       Business Tax Returns (for both the Buyer and the Seller)

You should prepare to submit 3 prior years of Business Tax Returns for both yourself and the person selling their FedEx Route(s).

Business Tax Returns are required by the SBA. Any lender that you would use to finance buying a FedEx Route should ask for a copy of 3 years, including all schedules. If you don’t already have them on hand, you’ll want to collect them when you prepare to buy a FedEx route.

Be sure to collect 3 years of returns from the seller and have 3 years of personal returns ready to provide to your lender. If you own existing businesses, you’ll need to provide 3 years of tax returns for those entities as well. Year-end financial statements will not suffice as most lenders underwrite to the tax returns.

4.      Interim Business Financial Statements

To assess the current operations of the selling entity, your lender will ask for Interim Business Financial Statements from the seller, in addition to the tax returns.

Interim Business Financial Statements consist of the year-to-date profit and loss statement, balance sheet, and debt schedule (it is important to understand if any of the vehicles have outstanding debts). They’re used to help gauge the most up-to-date performance of the FedEx route business throughout the current year.

Work with the seller of the FedEx route to assemble the interim business financial statements. You’ll need to include an income statement, balance sheet, and debt schedule for the year to date.  

5.      Personal Financial Statements

Prepare your own personal financial statement. This should include your assets, debts, and income outside of the FedEx business.

The personal financial statement helps your lender understand your financial strength and which financing options are available. This is an especially important document for business acquisitions and startup businesses since the overall strength of the owner is a larger part of the credit analysis, compared to analyzing an existing business with a demonstrated track record.

Other Documents You’ll Need to Finance a FedEx Route with SBA Loans:

Affiliate Financials

The SBA requires statements for all the businesses in which you own 50% or more. You will be required to provide the affiliate financials for these businesses, which includes the business returns, financial statements, and debt schedules for those businesses in addition to the statements for the FedEx route acquisition.

Part of the SBA loan eligibility criteria is a ‘credit elsewhere’ test. By requiring the financials for all your affiliated businesses, the SBA can assess your ability to secure financing through a conventional loan option. This helps them determine whether or not their small business loan is a good fit for you based on your business portfolio.

Streamline your SBA loan application by compiling your affiliate financials alongside your other financial statements.

Letter of Intent or Draft Purchase Agreement (with Exhibits)

If you plan to utilize seller financing to purchase a FedEx route, provide your lender with a Letter of Intent (LOI) or a draft Purchase Agreement (PSA) with exhibits between you and the seller of the route.

Seller financing is a financing option in which the seller works with your lender to finance part of the down payment for the FedEx route purchase. The seller absorbs some of the risks of the sale, so they’re incentivized to see you succeed because their money is on the line, too. As a buyer, seller financing should signal confidence in the route from someone that’s worked it before.

You don’t need seller financing to secure an SBA loan to buy a FedEx route. However, seller notes either on full standby or normal repayment terms are often favorably viewed by lender’s credit teams.

An LOI or PSA are both great documents to give your potential lender to keep the financing process efficient. Both documents provide many of the details your lender will need to structure your financing package. By submitting one of these documents with your application, you’ll provide a a quick reference on the purchase terms, non-solicit/non-compete, seller and buyer’s disclosures, details on any seller note(s), and any contingent items.  

Get Ready to Buy a FedEx Route with Affordable Financing

Whether you’re still researching FedEx routes for sale or getting ready to apply for an SBA loan, we hope to be your financing resource throughout the entire process. Complete the form below to speak with one of our FedEx specialized financing professionals:

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West Town Bank & Trust is not endorsed by and is not recommended by Federal Express Corporation and FedEx Ground. West Town Bank & Trust is not sponsored by, is not approved by, is not associated with, and has no connection with Federal Express Corporation or FedEx Ground.