Most consumers are unaware that Federal Express contracts with entrepreneurs for package delivery. These contracts are valuable assets that can be bought, sold, and financed like any other business. Generally, the purchase price for a FedEx route business is between 3.5x to 5x cash flow (also known as EBITDA). For example, a FedEx route business that generates $1 million in sales and $150,000 in EBITDA may be sold for $600,000.
Unlike typical businesses, owning a FedEx route has several benefits. Owners do not incur sales and marketing expenses, carry inventory, deal with accounts receivable, or face bad debt. Revenue is based on the number of packages delivered. With the COVID-19 pandemic accelerating online purchasing, many routes have experienced revenue increases between 20% and 40% year over year in 2020. The key metrics for FedEx entrepreneurs to focus on are controlling payroll costs and ensuring safety.
During the COVID-19 pandemic, many Small Business Administration (SBA) lenders were enthusiastic about providing loans for FedEx routes due to the surging growth. However, after the pandemic, many SBA lenders have become hesitant to offer FedEx route loans. This is primarily because FedEx has the authority to revoke routes from owners based on annual performance reviews. Bankers are reluctant to provide long-term loans for businesses that could vanish due to the whims of a third party. Although there are still FedEx route lenders in our network, their numbers have significantly decreased compared to previous years. To be introduced to a FedEx route lender, utilize our Lender Connect tool.
Benefits of FedEx SBA route loans
- 10 year term vs 5 – 7 years for conventional loans
- 20% down vs 25% for conventional
Drawbacks to FedEx SBA route loans
- Higher cost (initial fees and interest rates) than conventional loans
- Slightly longer time to close (45 – 60 days)
- FedEx can pull routes based on an annual review of performance
Typical SBA bank requirements for Fed Ex loans
- 20% down payment
- Credit score of 650 or higher
- Personal liquidity of 10% or more after
If you’re interested in obtaining an SBA loan to purchase a route, simply fill out our Find me a Lender form. We have a wide network of banks with extensive experience in providing SBA loans and some that still do FedEx routes. It’s worth noting that many local banks have limited involvement with SBA loans, and only a few have experience with FedEx route loans, if any. Let us assist you in expediting your financing process by connecting you with banks that truly understand your needs.