All You Need To Know About Franchisee Financing With Alternative Lenders

Running a business under the protection of a well-known brand is a great way to make good profits. With a franchisee, you have the backing of an established marketing ecosystem, a recognized product, and a readymade customer base.

But along with all the advantages of working with a franchisor, you also have to manage many challenges. The biggest of these challenges is financial in nature. Purchasing a franchise is a substantial cost, but it is not the only one. Let’s delve further.

You need to put a lot of upfront investment on the table – While you might be able to make changes to cut costs with your own business, in a franchisee, you have to stick to certain minimum requirements. From the store décor to manufacturing or operating procedures to staff training, there is a fixed way of doing things with a franchisee. All of this can become quite costly in the long run.

Cash flow problems – Discounts, prepayments, and excess inventory can lead to cash flow problems. In order to attract new customers, many new franchisee owners offer additional discounts and deals – these obviously dent their own profits and can lead to such severe cash flow issues that meeting even the most urgent operating costs can become tough. In some cases, they also tend to overstock on good deals. While this is a good idea, in the long run, it does put current finances under stress.

Additional advertising and similar business costs – Many franchisee owners also have to invest out of their pockets on enhanced advertising, especially in the local area. This becomes critical for drumming up business, particularly for new franchisees or ones in very competitive localities. Extensive marketing efforts also require funds, which must come out from the profits of the owner.

How Do Franchise Owners Manage These Financial Challenges?

Most banks require an exhaustive amount of paperwork with the application and take a long time to share their approval decisions. And the truth is that first time and single-unit franchise owners are highly unlikely to qualify for a traditional banking offer even when their paperwork and FICO score are perfect. All this has turned franchise owners away from banks and towards alt-lenders such as Mantis Funding, which deliver super-fast funding at highly competitive costs.

How Alternative Finance Companies Help Franchise Owners?

Alternative lenders do away with all the bottlenecks that crop up while dealing with the traditional banking sector.

Fast approval and processing times – The waiting is reduced to just a few days! Where earlier a franchise owner might have had to wait for a few weeks just to know the status of their application, now they can get the money in their bank in less than 2 business days! Some lenders like Mantis Funding review and approve applications for smaller amounts in less than 24 hours!

Easy approvals – Another big advantage of alt-lenders is the fact that they have delinked their approval process from FICO scores. Credit scores still form a part of their risk assessment process but are not a deal-breaker, as is usually the case with traditional lenders. This means that franchise owners can get funded despite having a less-than-perfect credit score; the transactional and revenue data of the business matters more.

Customized offers – Along with the other vital points, such as speed and ease of funding, alternative lenders are also very popular because they offer a lot of scope for personalization. For example, Mantis Funding provides cash advances to tide over off-season cash flow problems as well as amounts over $200,000 in the form of a business line of credit. The business owner can choose the amount, negotiate better terms, and opt for the type of service that suits their needs best.

Are you operating a franchisee? Do write to us about your experience with cash flow problems and the solutions that worked for you.

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