Clearing Up Cashflow Confusion

Funding your franchise dream can be one of the most stressful and confusing processes of owning a business.

Do you turn to a bank? A finance company? And where should you start when researching where to find your finance? Franchise Buyer’s Emma Webb speaks to Cashflow It National Sales Manager Dan Toms about the options available to you when looking to fund your first franchise.

Cashflow It National Sales Manager Dan Toms says a good place to start when looking for finance is the Finance franchisor.

“The brand may already have funding arrangements in place with certain lenders,” he says. “A number of lenders, including Cashflow It have accreditation programs in place for franchise brands, which means that franchisees may already be pre-approved for funding. 

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“It is also important that franchisees assess what available capital they have to invest in the start up costs of the business. There is no point investing every available cent in the startup costs and having nothing remaining for working capital.

“They should consider things like what type of funding solution would suit them, such as lease, rental, chattel mortgage etc.“I would also suggest thinking about their exit strategy, if they are looking to build the business and sell it for a profit then they should investigate if the financier will allow them to pay out the contract early or if there are exit fees and penalties to do so. They may want a more flexible option.”

Franchising is misunderstood in the finance industry

Although franchising has been around for many years, it is still largely misunderstood in the finance industry, according to Dan, who says they are a great option for those looking to fund franchise equipment from someone in the know.

Cashflow It is very different from a bank or any other finance company in that we only provide funding to the franchise sector and therefore everything to do with our business is specifically tailored for that industry...

“Cashflow It is very different from a bank or any otherfinance company in that we only provide funding to thevfranchise sector and therefore everything to do with ourvbusiness is specifically tailored for that industry,” he says.v“Other lenders classify franchising as small businessvand lump it together with all the other small businessvapplications such as sole traders operating a gardeningvbusiness or a couple looking to open a corner store.

“The way that we review applications is very different from traditional lenders in that we take into account the strength of the brand and the support that they offer rather than simply looking at the personal asset position of the individual applicant. Our product mix is different and we offer funding solutions to suit different scenarios that franchisees face such as; a new store fit-out, store refurbishment, store re-sale or simply to purchase new equipment.

“We also offer a range of terms to align with franchise agreements and individual circumstances. Our approval times are also much faster than traditional lenders. ”Cashflow It was established in 2013 out of necessity, according to Dan, who says accessing funding for franchisees could be difficult. “These other lenders didn’t specialise in franchising or even understand the industry so accessing funding could often be very difficult,” he says. 

“It was clear that a franchise specific lender was required. One with a more competitive offer that could make accessing funding for franchisees a much simpler process. “By financing their equipment with us, business owners are also preserving their precious capital for other uses such as growing their business.

“If they select a rental or operating lease then the funding is off balance sheet. This means that it will not affect their ability to borrow in the future. As well as the tax benefits, our clients also benefit from the flexibility of our products. The low weekly repayments also assist with the cash flow of the business.”