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Grow Your Franchise with a Line of Credit

Jul 28, 2021

As a business owner, you understand how costs can add up and may even present cash flow issues throughout the year. A small business line of credit may be able to help you bridge such gaps and even help you grow your franchise, thanks to quick access to short-term capital. Below you'll find some common ways a line for credit can help you sustain and grow your franchise, but first...

What is a line of credit?

A line of credit is a revolving amount of money you can borrow on an as-needed basis. It’s an “on-demand” loan that acts like a credit card in that you can borrow up to a maximum amount of money. Fortunately, it comes with lower rates than what most credit cards charge. Unlike a term loan or SBA loan, where you receive a lump sum of money at once, you only borrow and pay interest on the amount you actually spend. And once you’ve repaid the amount you borrowed, you have access to the full line of credit once again. In general, there are two different lines of credit you can take out: a secured or an unsecured line of credit. A secured line of credit requires some type of collateral, like real estate or inventory. Whereas an unsecured line of credit doesn’t come with any collateral requirements. However, you may need a better credit score to qualify for an unsecured line of credit.

5 Ways You Can Put a Line of Credit to Work

Here are some common ways a line for credit can help you sustain and grow your franchise.

1. Financing franchise fees

Opening a franchise or even just another branch usually comes with start-up costs. Although franchise royalties are usually based on a percentage of your revenue, you may be responsible for paying certain franchise fees and other costs regardless of your income. These expenses may vary by business, industry, and state. However, you can likely find many of them already spelled out in your franchise disclosure document (FDD) or other contract.

2. Saying yes to more new business

Taking on new business sometimes requires you to cover many upfront costs, even before you invoice your client. This is especially true in materials and labor-intensive industries like construction and maintenance. After you secure supplies and hire the help, you have to wait until the job is done to bill the client, and in some cases, wait another 30 days (or more) for them to pay. Late payments are a common problem for businesses like yours. According to Fundbox research, 64% of SMBs get paid late, and as a result, 23% can’t invest in new equipment or hire new employees, and 17% can’t build up inventory. When you are not paid on time or slowly, this can inhibit your company’s ability to obtain big customers, because big customer accounts often require more capital to service. These temporary cash flow problems could require you to turn away potential business, sending them to your competitors instead. By smoothing out the bumps caused by monthly income variations, or by injecting a needed boost in capital, a line of credit can help you be ready to take on new business.

3. Stocking up for your seasons

If your business is affected by cyclical demand, such as in construction, HVAC, or tourism-related maintenance, a line of credit can do much more than tide you over during leaner months. It can help you prepare for the next big season and meet future customer demand by investing in supplies, equipment, or inventory in advance. Tapping into your line of credit lets you take advantage of the following opportunities:

  • Improve your hiring budget by investing in job ads, recruiting, training employees, and planning for additional payroll expenses.
  • Save money by resupplying or buying off-season, when prices are the lowest.
  • Reduce downtime by performing deferred or preventive maintenance on your vehicles or machinery.
  • Add new capabilities through modernized equipment, new software, or new skills.
  • Improve relationships with suppliers by making larger deals.
  • Diversify your offerings by adding alternate services for all seasons.

Start by coming up with a financial plan for how much you’ll need to cover new employees, inventory, equipment, and anything else you need. If you’re not sure where to start, it can help to look over last season's numbers to figure out how much you’ll need.

4. Expanding your current location

Traditional construction loans are one popular option for building, repairing, or expanding commercial structures. However, such loans usually require additional costs and red tape. This includes things like a down payment, appraisal fees, excellent personal credit, financial documentation, and more. On the other hand, a business line of credit may turn out to be faster and much easier to secure, especially to help cover short-term costs like:

  • Remodeling or repairing your existing facility
  • Branching out with a satellite office
  • Complying with mandated fire codes, ADA standards, zoning, or other laws

5. Improving your marketing

Growing any business usually requires marketing—and marketing usually requires money. A survey by US Bank reported that 64% of failed businesses cited “Minimizing the importance of promoting the business properly” as a reason they shuttered. That’s why you should consider resisting the temptation to slash your marketing budget, even if times get tough. A business line of credit can support marketing in many ways:

  • Tradeshow attendance for promoting, learning, and making deals
  • Search engine marketing (like local Google Ads or targeted remarketing)
  • Radio or TV advertising, including targeted local broadcast or cable
  • Direct mail or outdoor advertising, from postcards to billboards
  • Promotional giveaways, like pens, refrigerator magnets, or other items

Steve Wiideman, owner of the Wiideman Consulting Group, said, “Sometimes you miss out on opportunities just because you don’t have the funds. With [a business line of credit], we’re able to invest in marketing to help us grow.”

How to apply for a line of credit

Just like small business loans, you’ll need to show proof of business revenue and creditworthiness to take out a line of credit. You can expect to provide the following information during the application process:

  • Your business license
  • Business history
  • Bank statements
  • Personal and business credit
  • Personal and business tax returns
  • A profit-and-loss statement
  • Income statements

Your lender will let you know the exact documentation needed to apply for a line of credit. Most businesses will apply through a bank, credit union, or online lender. There are advantages and disadvantages to each option. Banks and credit unions tend to offer the lowest interest rates but often have stringent application requirements. Plus, it can take longer for such lenders to give you access to the approved funds. In comparison, online lenders sometimes have slightly higher rates but offer a streamlined application and approval process.

Funding: a great friend for your franchise

A business line of credit can help you cover short-term cash flow needs, take on more new business, and invest more heavily in growth strategies. Plus, business lines of credit tend to be easier to apply and get approved for.

*Testimonials reflect individual experiences. The described results may not be typical.


If you’re interested in taking out a small business line of credit, Fundbox can help. Applying doesn’t affect your credit score, and most credit decisions are quick. You can get a credit decision in minutes, and if approved, access funds as soon as the next business day—so you don’t have to wait to start growing your franchise.

Note: Fundbox and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
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