If life was simpler, nobody would choose to live with debt. You may have heard the phrase ‘No debt is good debt’. But to what extent is this true?
Throughout history, people have pioneered creative problem-solving solutions for everyday life – simple things like back scratchers, or more complex solutions like smartphones, or even artificial intelligence. Borrowing money may just be the solution to your specific business problem.
Problem solving for business owners requires investment of both their time and in most cases, money to achieve their goals and objectives. You may be:
- Starting a franchise
- Buying or selling your franchise
- Refurbishing your store
- Purchasing equipment & vehicles
- Cash flow financing
However, this isn’t to say that borrowing money is always practical or the right solution for you – in some circumstances, it won’t be.
Don’t let the idea of borrowing money frighten you
If you are looking at becoming a franchise business owner, or you are one already, you shouldn’t let the idea of borrowing money and building debt frighten you. Borrowing money could be used to gain leverage, enabling you to grow your business more quickly and efficiently. This should allow you to capitalise on immediate opportunities that without investment could pass you by. The key is identifying the right time, the right amount to borrow and most importantly how and when you will be able to repay it.
Using all of your own cash may not be the best decision
When deciding whether to use your own cash reserves, it is important that you weigh up the advantages and disadvantages. While using your own money would leave you debt free, it may leave you exposed should your business begin to struggle. While franchise businesses have a lower rate of failure, as business owners we should acknowledge and understand the risk involved in business.
You must repay borrowed money on a schedule arranged at the beginning of the agreement. If there are cash reserves available, you will be able to support the business during slower periods. In some cases, a franchisee may sometimes be asked to place personal assets at risk to support a lending application and ensure repayments are made. This does not intend to put you off looking for funding; it is just important to ensure the borrowing is affordable and right for both you and the business.
Flexible repayment options are available
Remember, many lenders have various repayment options available which cater for new or seasonal businesses, to support business owners during the initial start-up months or less profitable times of the year. For example, Hitachi Capital Franchise Finance offer a ‘smart funding’ solution to support seasonal business needs. Having flexible payment options for new small businesses are extremely beneficial and can be a key driver in building a successful business. Understanding the finance options available from different funders will present opportunities for you to start or grow your business.
Building your credit profile
If you are considering growing your current business further – in the context of franchising, you could be starting a multi-unit operation, upgrading your assets or moving your site. You may not be able to achieve this solely through your own funds, so building your credit profile would be crucial towards convincing lenders that you’re a credible, dependable borrower – and this may only be achieved through borrowing in the first place.
Overall, there are a few things to consider when deciding to borrow money:
- Will you be able to make the repayments, even during challenging times?
- Do the repayment options tailor to your specific business needs?
- Do you see value in building a credit profile?
This is a decision that only you can make. However, if you have any questions, you can speak with one of our expert funding consultants. We’re here to help you take those next steps in your business journey with confidence.
Telephone: 01844 355575