If you’re considering purchasing a delivery business, where the money will come from is important. Financing an Amazon delivery service partner (DSP) route business is no different. After all, depending on the size and location of the route business, it can be a challenge.
According to a recent report, the average cost of an Amazon Delivery Service Partner business is around $200,000. While this is a significant investment, these routes have proven to be profitable ventures with a low barrier to entry. For instance, Amazon provides training, offers discounted insurance rates, and has the infrastructure in place to ensure streamlined operations, giving business owners a jump toward success.
Here are a few options for financing an Amazon Delivery Service Partner Business, and how they work.
SBA Loans
One option for financing an Amazon Delivery Service Partner route is a Small Business Administration (SBA) loan. These loans are guaranteed by the government and can provide the amount of funding you need quite easily. However, they can be more difficult to obtain than other loans, as they require a strong credit score and a detailed business plan.
Additionally, getting this type of loan takes more time than other financing, and funds may not be dispersed immediately. Depending on how time sensitive the deal is, this can make a difference in whether or not you close on that particular route or not. When you are looking at finance options, consult a route broker to determine the right options for you..
Bank Loans
Another option is a traditional bank loan. These loans can provide the necessary funds to purchase a Delivery Service Partner Route, but there are some things to watch out for.
- These loans may come with higher interest rates and stricter repayment terms than an SBA loan.
- You still may need to have a high credit score to qualify. You’ll still need a fairly robust business plan, although perhaps not to the extent of SBA loan requirements.
- You may need a larger down payment.
- You may need to secure at least part of the loan with your personal assets or property.
However, if you have a good relationship with your bank and good credit, this could be a viable option.
Seller Financing an Amazon Delivery Service Partner Business
If the seller of the Amazon Delivery Service partner route is motivated to sell quickly, they may be open to the idea of financing the purchase themselves. This option allows the buyer to make payments directly to the seller over a period of time, but it is not common, and the owner will often want higher interest rates and ways you guarantee the loan.
The best advice is to have a route broker who can evaluate the contract for you and determine if there may be better options available in your situation. While seller financing can seem like an easy option at first, it is not always the best way to go.
Leverage Your Own Assets
Another option for financing a DSP route purchase is to use your own assets to borrow the needed funds. You can do this by using a rollover from a 401k or other retirement account you may have built up from an employer, use at least part of the equity in your home to secure a loan, or borrow against stocks and other assets you have.
While these options may be attractive due to its accessibility, there can be significant implications. Rolling over your 401K may have tax implications or penalties for early withdrawals. Using the equity in your home or leveraging stocks is a significant risk.
In most cases, leveraging your own assets is the least desirable and highest risk source of funding.
Ultimately, the best financing option for a DSP route purchase will depend on your personal financial situation, credit score, and overall business plan. Just as with any other business, you need to do your research, prepare your finances, and seek professional financial and purchasing advice. Just like when you purchase a home you have an agent and a mortgage broker and a team of others around you.
The market demand for Amazon services continues to grow exponentially, making it an attractive investment. In fact, Amazon’s revenue has increased from $74.5 billion in 2013 to $386 billion in 2020. With such growth, Amazon continues to invest in their delivery operations, and is a good reason for you to do the same.
The options you choose for financing an Amazon Delivery Service Partner business depend mainly on personal preferences, your financial status, and the details surrounding the investment. The good news is that there are plenty of funding options available. When you’re ready or if you just have questions, contact us here at Route Advisors. We’ll help you find the best options for you, and we’ll be with you every step of the way.