Case Study: Business Finance For Smaller Business And Franchises

Got 2 minutes? Our case study covers finance for small businesses and franchises.

The subject of our case study was introduced to us by another finance expert whose client had seen a darkhorsefinancial.com.au post. They were a franchisee of a well-known group. To assist their cash flow while waiting for payment from their clients, they had been given an invoice financing facility with a credit limit of $30,000. The interest rate was 0.86% per week – that’s 44% pa!

It’s true that most lenders have a preferred type and size of business they like to work with, but others are more flexible. After discussing the circumstances with one of our lenders, they could see the value of being involved with the franchise group and were prepared to offer an interest rate that was less than a quarter of the client’s current rate.

It probably goes without saying that reducing the client’s interest payments by almost three quarters was an enormous financial benefit to the client, which helped protect their working capital.

Why putting effort into sourcing small business loans is so important

Borrowing money is standard practice amongst most small businesses. However, the above case study showcases the importance of correctly sourcing your business financing. A large number of smaller businesses can’t afford the professional advice of a business adviser, but that doesn’t mean that sourcing the right solution is out of their hands; at darkhorsefinancial.com.au, we are passionate about educating and enabling Australian businesses to access the best finance solution for their needs.

Working on a business plan

Every savvy business owner knows that without a business plan, it can be tricky to understand what the right option to borrow money is. A plan not only helps you track growth, but you can look at financial statements to identify areas that could be revisited (such as our client above) or where a re-structure, say to be a part of a franchised group could be beneficial.

A plan will also enable you to forecast your revenue which will undoubtedly assist any prospective lender with understanding your revenue source and determine your ability to repay a small business loan.

Understanding your small business financing options

Business loans, of course, aren’t the only financing option a small business has. Small business loans fall under the ‘debt finance’ umbrella, but there is also the chance you may be able to look at equity finance.

Understanding all of your options, including the difference between debt and equity finance, can help you understand all the options for you, and potentially save on fees and interest rates, just like our client did.

Of course, lending criteria apply to all types of debt finance, but options are available no matter your situation. If you’ve got bad credit, you certainly won’t be ruled out based on this alone!

Use your business structure or financial situation to your advantage

Before accepting just any old business loan, consider how your business structure or financial situation could be used to support your lending. For example, in the case study above, our client was a franchisee of a larger franchised group. This provided a level of security that wasn’t recognised by their previous lender.

You might be surprised how the lending criteria differ between credit companies and among the different loan types.

Even if you aren’t part of a franchised group, you might hold assets such as residential property, commercial property or outstanding invoices that can all be used as collateral. Companies who offer credit to businesses typically lean favourably toward secured lending, as it gives them better security that you’ll be able to pay back the loan.

Make your next business loan an investment into your business

Investors invest funds into your business, but without venture capitalists on your side, you’ll need to invest time into making the funding decisions you need to help see your business grow.

Fortunately, at darkhorsefinancial.com.au, we pride ourselves on investing our time and services into Aussie businesses to find the right commercial lending solution for their unique business structure. To access this service for yourself, reach out to our team.