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Why you don’t need to be daunted by debt

Why you don’t need to be daunted by debt

Borrowing money may be the solution to your business needs, according to Hitachi Capital Franchise Finance

You may have heard the phrase ‘no debt is good debt’, but to what extent is this true?

Throughout history, people have pioneered problem solving solutions - simple things like back scratchers or more complex solutions like smartphones. Borrowing money may just be the solution to your specific business problem.

Business owners require investment of both time and, in most cases, money to achieve their goals and objectives. However, this isn’t to say that borrowing money is always practical or the right solution for you.

Don’t let the idea of borrowing money frighten you

If you’re considering becoming a franchisee or you’re one already, you shouldn’t let the idea of 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 your own cash may not be the best decision

When deciding whether to use your own cash reserves, it’s important to 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 franchises have a low rate of failure, company owners 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 be asked to place personal assets at risk to support a lending application and ensure repayments are made.

This isn’t intended to put you off looking for funding, it’s just important to ensure the borrowing is affordable and right for both you and the business.

Flexible repayment options are available

Many lenders have various repayment options available that cater for new or seasonal businesses to support them during the initial start-up phase or less profitable times of the year.

For example, Hitachi Capital Franchise Finance offers a ‘smart funding’ solution to support seasonal business needs.

Flexible payment options can be beneficial and 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’re considering growing your current business, 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 by using your own funds, so building your credit profile would be crucial to convince lenders you’re a credible, dependable borrower - and this may only be achieved through borrowing in the first place.

There are a few things to consider when deciding to borrow money:

• Will you be able to make the repayments?
• Are the repayment options tailored to your specific business needs?
• Do you see value in building a credit profile?

This is a decision only you can make. However, if you have any questions you can speak with one of Hitachi Capital Franchise Finance’s expert funding consultants, who can help you take the next steps in your business journey with confidence.

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