There are many stages in the lifecycle of a franchise business and at certain times in this timeline there will be a need to look for some financial assistance. Historically, the norm would be to turn to your local Bank and try to source a loan from them. However, in recent years this has become more complex and a far easier and more flexible route is to utilise the services of a business finance specialist. They will take a whole of market approach and will match a specific loan type to the individual needs of the franchise.
The most common finance option for a franchisor is a business loan. A business loan provides the franchise with a set amount of money which must be used for business purposes. A fixed amount of interest will be added to the loan and repayments will be paid on a monthly basis for an agreed period. The business loan can be used for a number of options which include purchasing machinery, buying stock, boosting cashflow, increasing staff numbers and investing in new commercial property.
There are actually a number of different finance options that fit in to the business loan category. It is important to recognise the differences so that you can apply for the right finding option. Often the choices will be determined by franchise business factors such as performance, running period, assets, balance sheets and cash flow.
- Secured business loan – perfect for a franchise who has a strong trading performance and has many business assets. The finance will be secured against an asset such as a piece of machinery or a commercial property. Due to the use of the asset as security it is seen as a less risky option and franchise businesses will benefit from competitive interest rates and good repayment terms.
- Unsecured business loan – an ideal solution for a franchise that does not have a lot of business assets as you won’t need to offer any security for the funding. They are a speedy form of business finance, ideal for fast growth franchise’s but will often require some form of personal guarantee.
- Short term loan – when unexpected bills or unaccountable expenses occur a quick boost to cashflow is needed. A short term loan is perfect for this scenario, it is also ideal to help fuel high growth periods.
- Working capital loan – typically used to help with the payment of short-term expenses such as the purchase of more stock or payment of staff salaries. A working capital loan provide a suitable solution for franchises that need a more flexible solution where often the funding agreements are between 12 to 24 months.
When you are looking at business loan options it is always best to speak with a business finance specialist who is experienced with the franchise sector. They will be able to quickly recognise your specific needs and find the right business loan.
If you have a question in regard to business loans please call us on 01993 706403 or e-mail hello@ngifranchisefunding.co.uk.