As of May 2020, FedEx fully transitioned to an independent service provider (ISP) model, requiring route owners to operate both ground and home delivery routes. The new ISP guidelines also require route-business owners to run a minimum of five routes and/or 500 daily deliveries. To acquire the additional routes, many route owners will need to seek creative financing solutions, such as a FedEx ISP line of credit.

When to Consider Financing Your FedEx Route

Route operators may not have any trouble finding FedEx routes for sale; however, the search for financing can be a bit trickier when it comes to purchasing FedEx routes. For most FedEx route businesses, buying a FedEx route means finding a business loan or FedEx ISP line of credit with reasonable enough terms to build the route business successfully.FedEx ISP line of credit

Route consultants and lenders have no connection whatsoever with Federal Express, so it’s up to the route owners to find their own financing to purchase additional routes.

Financing Options for Your FedEx Route

The purchase price of a FedEx route varies depending on the location, the number of employees, and other factors, including the seller’s willingness to negotiate. Typically, sellers will ask for a down payment between 10-25%, which could mean $100,000 or over one million dollars. In a seller financing arrangement, the seller agrees to finance the down payment (with interest), but the buyer is then expected to find additional financing for the remainder of the price. Here are some financial options if you’re looking to purchase a FedEx route.

FedEx ISP Line of Credit

A FedEx ISP line of credit works like a business line of credit. Applicants fill out a simple credit application and then have access to a lump sum of money during the draw period—the length of the loan agreement. When route owners want to draw against the line, they request the funds, and the money is typically wired via ACH to the bank either the same or the next day.

FedEx ISP lines of credit are revolving lines of credit, which means once the withdrawn portion is repaid, the money is available to use again. A FedEx ISP line of credit can be used for:

  • Putting a down payment on additional routes
  • Unexpected repairs on trucks
  • Purchasing of used trucks
  • Operating expenses
  • Upgrading of office
  • Bringing on new employees
  • Handling the seasonality of the business

A FedEx ISP line of credit is different from a conventional loan in that you have some flexibility on repayment in terms of time to repay the loan and the amount borrowed.

Small Business Administration (SBA) Loan

The Small Business Administration (SBA) guarantees several kinds of SBA loans, although the SBA 7(a) is the most appropriate to purchase a FedEx route. Basic uses for the 7(a) loan include long- and short-term working capital for equipment and machinery purchases, purchasing real estate, and business expansion. Although the terms for SBA loans are attractive (low-interest rates), getting approved for the SBA 7(a) means a lengthy application process and requires an excellent credit history. In addition, the borrower will need collateral, a business plan, and industry experience.

The SBA itself does not provide the funds. The application begins with the SBA Lender Match, where you must specify what the loan is for, how much you’ll need, and other requirements. Then you will be matched to suitable SBA-guaranteed lenders.

Conventional Bank Loan

Getting a bank loan is like getting an SBA loan; however, typically, bank loans require even more conditions to be met before the lender approves the loan. Like SBA loans, conventional bank loans require considerable documentation during the application process, such as asking business owners to put up collateral and submit a business plan.

Conventional bank loans are term loans, which lend business owners lump sums with fixed or variable interest rates (interest rates for bank loans vary by lender, location, and business credit scores). Also called an installment loan, term loans mean borrowers make monthly payments and pay interest within the term limit of the loan—usually anywhere from six months to five years. Short-term bank loans work similarly; however, they are generally for less money and have to be repaid in full within 12 months. Bank loans also may have more restrictions on how the loan money can be spent.

Other Financing Options

Depending on the route owners’ financial situation, personal finance methods may be an option to help purchase additional FedEx routes. Alternative online lenders may offer financing to purchase corporation and FedEx ground routes, although typically, online lenders have higher interest rates. Route owners may also consider taking out a home equity loan/line of credit or tap their retirement savings. However, it’s a good idea to talk to an accountant or financial advisor before using your personal finances, as you can lose your home and retirement savings if you are unable to repay the loans.

Need Some Advice? Call Financing Solutions Today!

Financing Solutions offers a FedEx ISP line of credit with an easy application process (it takes less than two minutes to fill out) and requires no collateral or documentation for a written offer letter. However, you must already own your Fedex routes to be approved. 

The founders of Financing Solutions have started and grown several companies together, so they understand how important it is to keep costs low. That’s why Financing Solutions doesn’t charge you to set up the credit line, and there are no maintenance fees. We don’t ask for personal guarantees, and applicants can receive a no-obligation offer letter the same day. We make approval decisions based on our decade of experience working with small businesses and Fedex ISP are some of our top clients. Find out today why we have five-star ratings from the Better Business Bureau and Google. Also:

  • There are no costs to set it up or keep it in place
  • The easy 2-minute application online application
  • If approved, you’ll receive a same-day, no-obligation offer letter
  • The fastest setup, 48-72 hours
  • Once you have the line of credit, requests for funds are wired to your bank in minutes
  • You can use your line of credit whenever needed
  • Inexpensive when used (low fees)
  • There are no restrictions in place or collateral required
  • No personal guarantee is required, either
  • Financing Solutions is a leading provider of lines of credit
  • We are a reputable company with an A+ & 5-star rating
  • You can pay off the line whenever you are ready
  • The credit line is easy to renew and renews yearly
  • You have a secured account portal access 24 x 7

A FedEx ISP line of credit is a good funding resource available whenever your company needs it, without the heavy burden of term loan requirements. If you want to see if your route business would be approved and for how much, please fill out the no-obligation, 2-minute, Fedex ISP line of credit application here.