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Franchising Sector on The Rise – The Need for Alternative Funding Methods

News, Articles, Success Stories and Advice on Franchising
Franchising Sector on The Rise – The Need for Alternative Funding Methods

Franchising Sector on The Rise – The Need for Alternative Funding Methods

There is a positive impact on the franchise sector in South Africa due to the political development of the country – under Cyril Ramaphosa’s leadership. There is increased attention placed on entrepreneurship and the provision of support to small businesses. This is seen as a vital component in the National Development Plan (NDP), where a goal is to have 90% of new job creation done by the SME sector. A specific statement pertaining to franchises that appears in the NDP is to place focus on small business support services, meaning “supporting and growing franchising associations and getting involved in commercialising models of this nature”.

This renewed focus on small businesses could result in increased innovation and growth in the franchising space, which would have a positive knock-on effect for the growth and prosperity of the economy and would provide relief as the country recovers from the global Covid-19 pandemic.

Accessing Business Funding

When it comes to an entrepreneur wanting to purchase a franchise, be it the first time or not, business funding is often one of the major hurdles that come to play. The prevalent issue is not that there is no funding available, it is that most franchisees and entrepreneurs entering the franchising space do not know how to access it – or that funding opportunities exist beyond the traditional banks.

Alternative Business Funding

Alternative business finance solutions are not yet mainstream in Africa, and therefore require education and awareness to be successful. This is the challenge of the alternative funders filling the gap between the personal lending space and big banks. They need to educate and gain the trust of franchisees and entrepreneurs in South Africa if they are to successfully push their products into the market and assist the prosperity of the country.

Although banks can usually offer better pricing than alternative lenders, franchisees often need funding immediately and they are willing to pay a premium for speed and flexibility. That being said, the pricing that alternative lenders can offer franchisees is expected to come down quickly as algorithms improve and predictions of business risk become more accurate with more and more data entering the eco-system every day.

How Alternative Funding Works

Alternative lenders compare the risk of lending with the franchisee’s repayment ability – and that way they can issue funds much faster than banks ever could.

The due diligence process is also much faster than traditional banks’ processes, meaning that funds can be in your bank account in as little as 48 hours from application (depending on document availability). An added benefit that boosts our confidence in the growth and potential of the alternative finance space is that technology is at the heart of this space, effectively meaning that the opportunities and innovations are endless, and the speed is faster than ever before.

Where Does a Franchisee Even Start?

Because of the complex array and wide variety of products available to franchisees, the business finance market is a difficult one to navigate for potential franchise owners who are focused on running their businesses and surviving the tough economic conditions that exist today. To only mention a few of these verticals that exist in the business finance space – equipment finance, term loans (secured and unsecured), merchant cash advances, purchase order funding, and invoice discounting.

FundingHub

That’s exactly where business finance marketplaces like FundingHub step in to help. Their model has gained traction in the last three years, and it’s becoming evident that more and more business owners are turning to these sorts of aggregators as a solution to their needs. FundingHub are the experts in the field so that business owners don’t have to be. They understand that entrepreneurs don’t have time to successfully run their own businesses, especially in the trying economy that South Africa finds itself in, and therefore believe that the process of sourcing business funding should be made as easy and simple for business owners.

The Solution

Finding the right finance is now as quick and easy as filling out a 3-minute online application form, or requesting a callback, and then letting the FundingHub team find you the right partner for your business, at the best price available in the market.

If you are looking for finance for your franchise, let the FundingHub team find it for you. With over 40 different accredited finance partners, they are perfectly positioned to find you the best deal with the least amount of hassle. Their service is quick, easy, and free to use.

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