Funding your future

Borrowing is not always a bad thing, according to Rob Orme of Hitachi Capital Franchise Finance

If life was simpler, nobody would be living with debt. However, when you hear the phrase: “No debt is good debt”, to what extent is this true?

Throughout time, people have pioneered creative problem solving solutions for everyday life - from back scratchers to robots - and borrowing money may be the solution to your specific business problem.

Time and money

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 a franchise.
• Refurbishing your store.
• Purchasing equipment and vehicles.
• Cash flow financing.

However, this isn’t to say that borrowing money is always practical or the right method for you - in some circumstances, it won’t be.

If you’re a franchise business owner, you shouldn’t let the idea of borrowing money and building debt frighten you. Instead, it could be used to gain leverage, enabling you to grow your business more quickly and efficiently and allowing you to capitalise on immediate opportunities that could otherwise 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.

When deciding to use your own cash reserves, it’s important 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.

Ensure it’s affordable

You must repay this money. To ensure this, sometimes the franchisee will have to place their personal assets at risk to support a lending application. As a result, it’s important to ensure borrowing is affordable for both you and the business.

Remember, many lenders have various repayment options available that cater for new or seasonal businesses to support owners during the initial start-up months or less profitable times of the year.

For example, Hitachi Capital Franchise Finance offers 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 for success.

You might be planning to develop your current business even further - in the context of franchising, you may be considering 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 is crucial for convincing lenders that you’re a credible, dependable borrower - this can only be achieved through borrowing in the first place.

Things to consider

In conclusion, 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 up to you.

Best of luck.