Growth and sustainability is something that every business owner strives for, but there are many ways in which you can achieve this. Often considered a means of gaining a faster rate of development and larger market shares, one pathway you can take your business along is franchising. Whether you’re intent on becoming a franchisee or even a franchisor, franchising is all about growing as part of a network that enables your goods and services to reach out to more customers. However, doing so may incur a range of costs, which is where a Franchise Loan can help. By choosing to grow your business with the aid of a Franchise Loan you can spread out the cost of franchising through the use of a wide range of business finance products.
How does a Franchise Loan help my business?
Whether you’re intent on expanding your business as a franchisor or joining a larger network like-mind business owners as a franchisee, you’re bound to incur a wide range of costs during the initial stages of franchising. Just some of the cost you may be confronted with include an initial franchise fee, market research, equipment, refurbishments, staff training, signage and legal costs. For an aspiring franchisor the total amount you may be required to pay could be in excess of £50,000, whilst applying to become a franchisee could cost between £100,000 and £350,000, or beyond.
Either way, that’s a lot of money to be paying in one go, potentially causing your business problems later. But by applying for a Franchise Loan you can spread out the cost of franchising, avoiding the need to use up large amounts of cash from your business’ capital. As such, a Franchise Loan helps you remove the leash restraining your business and helps you progress to the next stage of development in total confidence.
What finance products can I apply for?
By choosing to finance the next stage in your business’ development with a Franchise Loan you can gain access to a wide array of funding options. Just some of the product you can choose to grow your business with include, but isn’t limited to, Business Loans, Invoice Finance and Revenue Advance.
Business Loans can be either Secured or Unsecured and are a great way of borrowing a lump sum for your business. By providing security through assets such as equipment, machinery or property you could apply for a Secured Loan in order to acquire sums from £5,000 to £1,000,000. Alternatively, you could borrow a lump sum ranging between £5,000 and £250,000 without the need to provide security by applying for an Unsecured Loan. Nevertheless, during the course of any potential agreement, you will be subject to a Fixed Monthly Repayment and will be required to pay a set amount at the end of each month for the agreed term, plus interest.
Invoice Finance presents another way that you can receive cash for your business by unlocking the money tied up in any unpaid business to business (B2B) invoice worth in excess of £5,000.
Because Invoice Finance uses your business’ unpaid invoices to generate a lump sum there’s no limit to how much your business could borrow. But before applying, it’s useful to understand that there are two products available to choose from Factoring and Discounting.
- Factoring: allows your business to unlock up to 90% of the overall worth of any B2B invoice you present to a lender. During the agreement, you will be tasked as the Credit Controller, and be responsible for credit collection and maintaining your business ledger. As soon as you begin receiving payments from the customer involved you’ll begin repaying the lender, plus interest and service costs.
- Discounting: again, allows your business to receive up to 90% of the total worth of any invoice B2B invoice and you will be the Credit Controller responsible for credit collection, but for a fee, you could make use of a lender’s ledger service, if it’s available. However, instead of the customer making payments to your business, they’ll be making repayments into a lender controlled facility. When the invoice has been fully repaid, a balance will be released to your business. This will be the remaining sum owed to you in the invoice, minus interest and fees.
A Revenue Advance is an Unsecured product that allows your business to receive an advance based on your monthly revenue. To generate an advance, lenders will ask to review your monthly sales reports for at least 3 consecutive months, taking into account both cash and card-based sales. Using your sales reports, they’ll work out an average. So if your business regularly makes a monthly revenue of £25,000, the amount advanced to your business will roughly be in the same region.
Once an agreement has been made and you’ve received your advance, you will be subject to a flexible monthly repayment scheme. So, for example, if a lender offers you a retrieval rate of 18%, that means you’ll be repaying 18p from every £1 your customers spend until the product has been fully repaid. Because payments are based on your sales, the amount repaid each month can be higher or lower depending on how many sales your business makes.
Franchising your business?
Franchising could be a great way for your business to make faster sales, higher turnovers and access a larger customer demographic. It’s also another way of overcoming issues created by local competitors and gaining advice from industry specialists. However, no matter whether you aim to join or start your own franchise, taking the next step in your business’ development is bound to incur a variety of costs. So If you’re interested in exploring the possibilities that franchising can present, apply for a Franchise Loan today, or find out more with Rangewell.