How to apply for a Franchise LoanPublished on 26th November 2017 - Last update on 8th January 2019
Whether you’re an existing SME owner or wish to bypass the challenges of growing a startup, investing in an established franchise and becoming a franchisee can be a useful way of scaling up and facing off your competitors. Whilst there are a great number of benefits of becoming a franchisee, including buying into a proven business model and benefitting from the additional support it brings, joining a franchise will incur a variety of costs from the franchise owner. These costs can include an initial franchise fee, refurbishments, equipment costs, supplies and freight charges. Depending on the size of your premises and your local area, the overall cost to join a franchise could total anywhere between £100,000 to £350,000, or beyond. This is why many business owners choose to apply for a Franchise Loan. But in order to apply for a Franchise Loan, you need to know what products are available and what criteria your business must meet for each, including:
- Business Loans
- Invoice Finance
- Asset Refinance
How can I apply for a Business Loan?
Business Loans are usually either Secured or Unsecured and are a great way of borrowing money for a variety of purposes, including raising funds to become a franchisee. When applying for a Secured Business loan you’ll be required to provide assets such as equipment, machinery or property as collateral to gain access to funds from £5,000 to £1,000,000. Meanwhile, you could access between £5,000 to £250,000 without the need to provide collateral by applying for an Unsecured Loan. In addition, you’ll need to present lenders with your credit score and could offer a Personal Guarantee to obtain a larger lump sum.
What do I need when applying for Invoice Finance?
Invoice Finance is a secured form of business finance that allows you to unlock up to 90% of the money owed to you in any Business-to-Business (B2B) invoice worth in excess of £5,000. In order to apply, your business must have sufficient annual turnover, up-to-date business ledgers and be able to show lenders your credit profile. As the credit controller, you’ll also need to demonstrate that your business is able to perform successful credit collections, as this will be down to you. There are no restrictions on how the funds can be used, meaning you can use them in a variety of ways, including becoming a franchisee. When applying for Invoice Finance, there are two types available: Factoring and Discounting. So, in order to make an informed decision, you must ensure that know how both of these products affect your business before entering commitments.
What are the criteria for Asset Refinance?
Asset Refinance allows you to release equity contained within any business asset for a wide range of purposes, including when deciding to become a franchisee. In order to qualify, you must present an asset or assets, such as valuable equipment, machinery, vehicles or property, as part of the agreement. These assets must also be unencumbered, meaning that you need to own them outright and that they are not subject to any existing finance arrangements. In addition, lenders will also want to see your credit profile.
Becoming a franchisee?
Competition has always been part and parcel of running a business but sometimes the level of competition that your business may face can be too intense, threatening your growth and long-term sustainability. So to maintain your share of the market and entice more customers to your business, choosing to become part of a franchise could be the solution. The business community has always been a highly competitive environment, regardless of whether you operate online or on the local high street, but if you’re interested in becoming part of a wider network of businesses and reaping the benefits of becoming a franchisee, but don’t possess the set-up costs, why not apply for a Franchise Loan today, or find out more with Rangewell.
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