With our experience in franchise lending for over 20 years, a common question to us and what a franchise investor is sometimes unsure of is if it is better to obtain a franchise business loan or simply pay cash, which is faster and easier?
- Preserve Cash (for cash reserve and for future loan pre-qualification). It is never good to be low in cash. Franchise Lenders need to see down payment funds available.
- Build Business Credit – Besides building personal credit, it is important to build business credit to allow for more and better funding options down the road.
- Need Working Capital – Obtaining bank financing allows for additional loan proceeds for cash reserve (extra important for start-ups), instead of using personal funds.
- Improve Expansion Capital Option – (Emergency Funds) There is less chance to use personal cash (at a later time), you never know down the line when having cash reserve will be needed. Use personal cash (being saved) for other investments or for personal expenses.
- Additional Investments – It is always a good idea to keep your business expansion options open for future franchise loan opportunities needs and have multiple income streams to increase revenue.
- Having Earlier Bank(s) relationship history speeds up Company expansion with additional loan(s). Leverage expansion at a faster rate.
- Mental Aspect less pressure on you emotionally and on your business having surplus cash in bank – stay motivated, not stressed…. Make more money being confident!
- “Cash is King” Having more personal and business cash is always a formula for short and long-term business success.