When a franchise is looking for some external funding, the traditional approach will be to contact the local bank or to try and source a business loan. However, there are a number of different options that could be more suitable. Let’s explore these in more detail.
Working capital loan – a universal funding solution which can help franchise businesses to easily manage their cashflow. Areas such as VAT returns, corporation tax, staff recruiting, and annual insurances/licences can be covered by working capital loans.
Asset finance – suitable for the purchase of franchise assets such as machinery, office equipment, catering equipment and much, much more. Any business asset that a franchise needs to successfully operate can be purchased using asset finance. This is a very flexible option and can include both hire purchase and finance lease.
Invoice finance – cashflow is severely affected when a customer takes an excessive amount of time to arrange payment. To eliminate these issues a franchise can look to utilise invoice finance. Through this facility a franchise can immediately receive funds as soon as a payment has been issued to a customer. There are no monthly fees required and the company lending the money will recoup their investment as soon as the end customer has paid the final invoice.
Stock funding – very similar to invoice finance apart from the lending is secured against any stock which a franchise holds. The funding will bridge the gap between stock being held by the franchise and when it is purchased by a customer. The equity of the stock can be released early so the franchise can continue to grow its business.
Start-up loans – During the start-up phase of any new franchise or franchisee, maintaining a healthy cashflow is very important. You can never account for everything and there will virtually always be something which needs purchasing as a matter of urgency. Taking advantage of a start-up loan will enable these types of purchases to be made.
As we have demonstrated there are several alternative funding solutions available for a franchise. If you have any questions or would like some help, please call our business finance team us on 01993 706403 or e-mail hello@ngifranchisefunding.co.uk.