Trying to find the right business loan for your franchise can feel like a minefield. With lots of different options to choose from and terminology that many are unclear on, it can be a very tricky decision. You really want to ensure that you fully understand the options available so that you can select the funding solution that will be right for your franchise both now and in the months to come.
It is important to recognise that you can obtain either a secured or an unsecured business loan. Both are structured in the same format whereby an agreed amount of money is loaned to your franchise for which you then have a set period to repay the debt. A monthly payment plan will be agreed which will include interest charges. The loan can be used for a whole host of purposes such as boosting cashflow, purchasing new equipment, property refurbishment and day to day running costs.
Secured loan
A secured loan means an asset in the business (e.g. machinery, equipment or property) is used as the collateral for securing funding against. Basically, it is a security net used by the funder that should anything happen to the franchise resulting in payments not being met then the asset will be reclaimed by the lender. This type of loan offers less risk and therefore you can find lower interest rates and competitive repayment terms. Also, if you are in a position to repay the debt earlier than anticipated often there are no penalty charges.
Unsecured loan
With an unsecured loan you don’t have to put up an asset to secure the funding. Lenders will simply look at the performance of the franchise by evaluating its trading history, financial standing and business performance. Applying for this type of loan is a much quicker process and decisions are made swiftly. This is an ideal choice for any franchise that does not own a large number of assets, but which has a good trading history. On most occasions they will be a need for franchise owners to offer a personal guarantee in order to secure the additional funds.
If you would like to find out more about the options available for business loans, then we have a team of experienced franchise finance specialists available to help. Please call us on 01993 706403 or e-mail hello@ngifranchisefunding.co.uk