We may earn money or products from the companies mentioned in this post.
LuLaRoe stands alone in a crowd of direct sales companies. They have paved the way for many direct sales companies to branch into clothing sales, which is still a relatively new idea in mainstream society. There is one other factor that sets LuLaRoe apart from most direct sales companies. It’s their buy-in. The cost of LuLaRoe’s onboarding package has gone down (click HERE to read about these changes), but it still is higher than most companies. One of the most common questions I get asked by people who are thinking about joining is how to finance their onboarding package. So, let me break down a few options you have to pay for your onboarding package. I will discuss the pro’s and con’s for each method.
Disclaimer: I am not a tax professional or a financial guru. While I am discussing some potential options you have, please seek a professional opinion before making a final decision.
Loan From Savings
While this might not be the norm for everyone, some people have the money set aside from savings or a tax return to fund their entire onboarding package.
Pro’s:
You don’t owe anyone anything. That’s a HUGE perk to this method. Please make sure that tapping into savings will not negatively affect your financial situation.
Con’s:
If you don’t have the money set aside, it will take time to build up the funds to get up to where you need to be to finance your onboarding. This could also knock out your savings, but you have a hustle to replace your funds. You just have to work for it. However, since you don’t technically owe anyone anything, there isn’t a fire under your booty to pay it back. So, make sure you set up a schedule to pay yourself back since you essentially are being your own financial institution.
Credit Cards
This is a very common method to finance your onboarding package.
Pro’s:
You can easily earn the perks from your card. Most cards have something special if you spend a certain amount within a certain window. Well, if you put your onboarding package on your card, chances are you will hit it. These perks could be extra airline miles, extra cash back, or you’re in your 0% interest grace period. You can pick a card based on the rewards you’d like to earn. I’m a huge travel bug, so I opted for the airline miles.
Con’s:
The APR on most credit cards is no joke. You need to pay off your balance, or you are likely to get whacked with a hefty interest rate. The going rate seems to be 27%. Think about that. You could quickly amass a huge balance. Another con to credit cards is that you need to have decent credit in order to get a card in the first place. If you don’t have the credit history, then this method may not be a viable method for you.
If you plan on using credit cards, please make sure to do your research into the card that best fits your situation, formulate a pay-back strategy, and finally figure out a plan for re-ordering inventory.
Family Loan
Many of my friends that I polled have used this method to finance their packages. Like most of the options available, a loan from a family member does have it’s pro’s and con’s.
Pro’s:
Since you’re getting a loan from a family member, you might have room to negotiate. Depending on who the loan is from, you might get an interest-free loan or something at a lower interest rate than you would from a bank. You can also negotiate the repayment terms.
Con’s:
This can be a very touchy situation. Lending money to family can open a whole can of worms. While you might be getting a wonderful deal from them, missing payments or a lack of communication can estrange any relationship no matter how strong of a relationship you are in. So, make sure you have laid out all of the terms. Make it clear on when you will be paying back the loan, what is the interest rate, and when you will be making installments, if you are. Communication is key, friends. Keep the channels open so your relationship doesn’t go south.
Loan From a Financial Institution
Pro’s:
Depending on your financial situation, you might be able to use some of your assets as collateral. If you have a good relationship with your financial institution, you should be able to negotiate reasonable terms. It’s also nice because all of the terms are laid out for you. You know exactly what to expect.
Con’s:
You’re at the mercy of the bank. It can also take time to get the funds dispersed from the bank. Since the onboarding process has been streamlined, you will have less time to get your affairs ready. You can always ask for an extension, but there definitely is an excitement involved with getting your call. Since you are also putting something up for collateral, you definitely need to make sure you’re paying back your loan.
Loan From Investments
Now I’m going to preface this option with the disclaimer that you should speak with whoever is managing your investments to discuss the tax ramifications. Potential sources of funding include your IRA, 401K, other retirement funds or investments, or a whole life insurance policy.
Pro’s:
Depending on the source you use, it is possible that you would be able to be your own bank. You could also receive this loan to yourself interest free. Since tax laws differ by state, I’m not going to say much more. But, if used wisely, this could be a fantastic option for you.
Con’s:
If you don’t make sure that you’re pulling from the correct locations, you could have to pay some hefty tax penalties. So, make sure you are well-informed on all of the perks and penalties you might encounter by using these methods.
Now with each of these methods, there needs to be a strategy to pay back your loan. I polled group of friends who were or are retailers, and the overwhelming response was that they didn’t work on paying back their debt quick enough. This can add extra stress to your life, so make sure you have a plan on how to get yourself out of debt. You should discuss this with either your sponsor or a financial advisor or CPA. Actually, do both. Use this to gauge on what your sponsor says. And then take this conversation to the next level and have the conversation on a re-ordering schedule. Make sure you are setting yourself up for success. If you’d like to discuss how I do my ordering, please feel free to send me a message HERE.
I truly believe you should interview your potential sponsor. Want to read more about my thoughts? Click HERE for an article on How to Join LuLaRoe. Scroll down to about halfway down and I talk about what to look for in a sponsor. HERE is a link to a list of 20 items you can do while you’re waiting in the queue. If you’d like to join my VIP Group to see how I run my business, you’re more than welcome to join me HERE.
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