5 ways credit lines can help you develop your franchise

5 ways credit lines can help you develop your franchise

5 ways credit lines can help you develop your franchise

Owning a franchise for a large national chain store can provide the best of both worlds. You will get a well-known and successful business model, and you can run it as freely as yourself. On the other hand, it brings a lot of fees unique to franchising, including some fixed fees. Whether you want to add a new franchise location, or expand or support an existing franchise location, Fundbox credit can help solve many of these common expenses and potential cash flow problems. Here are some examples.

1. Financing franchise fees

When you open a franchise store, even if you want to add a new branch, the area will bring a lot of start-up costs. Unlike royalties, no matter how much income you earn, you may be responsible for these payments. These fees vary by company, industry, and state, but should be detailed in your Franchise Disclosure Document (FDD) or other contract. Such expenses usually include:

  • Franchise and license fees The starting price may be between US$20,000 and US$50,000, and some require annual renewal.
  • Travel expenses It may be necessary to pay regular airfare and living expenses to train your team at the franchise headquarters or attend annual meetings.
  • Joint marketing expenses It may be necessary to pay monthly or yearly for national advertising services provided by the franchisor, such as TV and magazine advertisements.
  • Inventory and supplies Your franchise contract may require a minimum inventory level. Some items, from uniforms to napkins, may even need to be branded, so you can’t run to the hypermarket to pick up the goods.
  • Facility cost You can add up even after your initial expansion, including landscaping, signage, and monthly security fees, some of which may be required by your franchise agreement.
  • Legal and accounting expenses This can include consulting or hiring personnel, usually between US$1,500 and US$5,000 per contract, and may be necessary for the financial tracking required by your franchisor.
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“Once I can use Fundbox to invest in inventory, I can start a new job. This has helped me grow by about 15%.”
Scott Bullock, home appliance franchisee in southern Utah

Sample Decomposition of Approximate Cost in Typical Franchise InvestmentFranchise Cost Chart

Source: Direct franchise example from Relax the Back franchise (average amount based on estimates provided in the franchisor’s franchise disclosure document).

2. Say “yes” to more new businesses

One of the main risks of developing a business—especially in materials and labor-intensive industries such as construction and maintenance—is to bear the costs of taking on new jobs. After you get the supply and hire help, you have to wait until the work is completed before charging the customer, and then wait 30 days (or more) for them to pay.

Late payment is a common problem for businesses like yours.according to Fund Box Research, 64% of SMB payments are delayed, so 23% cannot invest in new equipment or hire new employees, and 17% cannot build inventory.

“When we didn’t pay on time or slowly, we couldn’t get big customers because the big customer accounts needed more funds to serve.”
Jose Ramirez, owner of Supreme Maintenance Solutions

Another option for growth is to reject potential business that may flow to competitors. By eliminating the turbulence caused by changes in monthly income, or by injecting required capital growth, the line of credit can help you expand your new business, including:

  • Introduce new people, By hiring internal talents or short-term contract workers
  • Bulk payment materials So they can start projects at any time, and some suppliers need cash for bulk purchases
  • Maintain uninterrupted supply During peak business hours
  • Invest in faster equipment, Upgrade computers, software, and even cutting-edge tools such as laser mold making machines, digital printers, or 3D printers
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3. Reserve for your season

If your business is affected by cyclical demands, such as construction, HVAC, or travel-related maintenance, a credit line can do more than just help you through the storm. It can prepare for the next big season by investing in supplies, equipment or inventory in advance and meet future customer needs. With your credit limit, you can:

  • Save money Supply or purchase in the off-season when the price is the lowest.
  • Reduce downtime By delaying or preventive maintenance of your vehicle or machine.
  • Add new features Through modern equipment, new software or new skills.
  • Improve the relation Make bigger deals with suppliers and key partners.
  • Diversify your products By adding alternative services for all seasons.

4. Expand your current location

Many business owners may first consider using traditional construction loans to build, repair or expand their business structure. However, such loans usually require additional fees and red tape, including down payment, evaluation fees, good personal credit, financial documents, etc. Commercial credit lines may be faster and easier to obtain, and help pay for short-term costs, such as:

  • Retrofit Or repair your existing facility
  • Grow Your existing square footage
  • branch Satellite office
  • updating Your company brand, signage and decoration
  • obey Have mandatory fire codes, ADA standards, zoning or other laws

“Our partnership with Fundbox allowed us to start and grow this department. It grew from an idea two years ago to drive hundreds of thousands of dollars in revenue in the first four years. I’m really happy.”
Mattox Group founder and CEO Alan Fagan (Alan Fagan)

5. Improve your marketing

Marketing is essential to growing your business. A survey report by Bank of America stated that 64% of failed companies cited “appropriately reducing the importance of their business” as the reason for their closure.4 This is why you should consider resisting the temptation to cut your marketing budget, even if the situation becomes difficult. Commercial credit lines can support marketing in a variety of ways:

  • Web development And updates, especially for mobile devices
  • Trade show attendance For promotion, learning and trading
  • Email automation Used for triggering or drip marketing
  • Search engine market (E.g. local Google Ads or targeted remarketing)
  • Radio or TV commercials, Including targeted local broadcast or cable
  • Direct mail or outdoor advertising, From postcards to billboards
  • Promotional gifts, Such as pens, refrigerator magnets, or other items
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“Sometimes you miss opportunities because you don’t have funds. and [a business line of credit], We can invest in marketing to help us grow.
Steve Wiideman, owner of Wiideman Consulting Group

See if Fundbox meets your franchise needs

access Fund Box Website Learn more and see if you qualify. Application will not affect your credit score. If approved, you can make a credit decision within a few minutes and receive funds as quickly as possible the next business day-so you don’t have to wait to start developing your franchise.*

* The decision time is based on the median decision time of Fundbox customers.
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