I recently read an article about franchise financing in the Business Journal. According to data prepared for the International Franchise Association, bank lending to franchises is predicted to fall short of demand. From the article:
Banks will increase lending to franchise businesses by 10 percent this year to $24 billion, but that falls $2.6 billion short of what this growing sector of the economy needs.
Traditional sources for franchise financing
Most franchisees are aware that they can finance their business through traditional sources. These typically start with refinancing their house, acquiring funds from friends and family, or even getting a bank loan. While these options can bear a low interest rate, they can also come with a high cost to growing businesses. High costs include limited loan amounts, restrictions on owner compensation, and long response times.
Alternative sources for franchise financing
Thankfully for small businesses, traditional sources aren’t the only options for franchise financing. Many businesses turn to alternate financing sources such as accounts receivable factoring, equipment leasing, or merchant cash advance companies. Alternative financing companies can meet the need for working capital when traditional sources fall short. These companies typically offer rapid turnaround, flexible terms, and higher advance rates than traditional financing options.
Factoring companies quickly turn your commercial accounts receivable into cash. Equipment leasing companies finance anything from vehicles to software, and most everything in between. Merchant cash advance provides an up-front cash disbursement repaid by future credit card payments.
Are you looking for working capital for your franchise?
At Commonwealth Capital, we can help. Earlier this year, we provided an accounts receivable factoring facility to a Minnesota medical staffing franchise. Are you a franchisee with commercial accounts looking for funding? Let’s talk! Give us a call at (952) 469-4460 or fill out the contact form.