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Why Working Capital Can Make or Break Franchises

Written by:
Michael Chang
Published on:
June 30, 2019

Helping your business customers succeed is a winning, long-term proposition. What if there was an easy solution for your franchise customer’s cash issues?

One of the largest concerns for a franchise is working capital. Failure to maintain positive cash flow means that a business has to dig deep into its cash reserves to settle debts. If a company operated with negative cash flow for too long, they would end up going out of business, leaving them to have to take drastic measures to pay their bills and save their business.

The goal of any business is to reach and sustain positive cash flow, but it can take months -- sometimes longer -- before a business reaches this level of success. In fact, according to Innovation, Science and Economic Development Canada, thousands of companies fail in Canada every year because they have no access to additional working capital.

While it may be possible for some companies to take out a loan, poor cash flow coupled with a bank’s lack of industry-specific knowledge can make securing a loan unlikely. Without proper financial expertise, these franchises find themselves in a downward spiral.

Fortunately, Ario, an online platform for credit solutions, can help solve this problem by providing access to loans on your behalf to your franchise and small business customers. But first, let’s take a look at what working capital is.

What is Working Capital?

The technical definition of working capital is the difference between current liabilities (bills owed, payroll, rent) and existing assets (cash reserves, inventory, typically anything that can be converted to cash within a year). The end result can be either positive or negative.

•    A positive working capital figure is ideal. It indicates that a business can pay its debts and still have money left over, which can be used as a rainy-day fund or invested in growth opportunities. However, keep in mind that a significant working capital number is not good either -- it may suggest the company is not investing in future growth.

•    Negative working capital is a red flag because it means the company will struggle to pay its debts and may have to take drastic means to come up with the money. This can result in slashing the number of employees or even selling long-term investments, such as critical machinery-- all of which hurts the business. In addition, a negative working capital figure means the company or franchise won’t be able to react to opportunities because they don’t have money to invest in them.

The good news is that your clients do not have to struggle with working capital issues on their own!

Ario, a Web-Based Working Capital Solution

Ario is a digital credit-as-a-service platform for companies looking to offer their franchises a working capital solution. The Ario platform can be customized to look like an extension of your company, so it seems like your franchises are getting a loan from you. In reality, the entire process is handled by Ario, which means partner companies are never responsible for the loan at any point. 

Since Ario’s process is driven by a machine learning algorithm, it can deliver near-instantaneous loans while diving more in-depth than a typical bank would. Ario’s algorithm considers seasonal cashflow and past financial performance.  The best part? Ario’s services come at no cost to you.


Why Does Your Franchise Need Ario?

A working capital infusion helps struggling franchises to solve temporary cash flow issues and fund investment in opportunities. A business can go through periods of unexpected lulls, significantly impacting revenue. Ario’s working capital solution can plug this temporary gap. In addition, a company can also take advantage of Ario’s working capital service to take on growth opportunities that they may have shied away from in the past.

By offering franchises a convenient, near-instant source of working capital, Ario can be a lifeline for your customers. However, Ario does not just help clients, it helps your business too:

•    Ario creates a critical competitive edge. It allows your company to become a one-stop-shop for key goods, services, and financial options.

•    Ario provides your franchises with more buying power. Ario can also offer financing plans for your customer’s purchases, allowing them to take on larger jobs and grow faster.

•    Ario helps your franchises succeed. Easy access to capital gives your franchisees peace of mind during the offseason and financial security. Ario is proven to bring returns for every $1 borrowed through the platform by means of rev-sharing with their Partners.

•    Ario grows customer loyalty. For your franchise and small business customers who were struggling, Ario’s services give them a way out. And since the service is branded in your name, it makes those customers more loyal to you in the future.

To empower your customers, you need a lending platform to help address the working capital needs of your B2B clients. By partnering with Ario, you’re committing to long-term benefits, such as easy financial solutions for your franchises, increased B2B customer retention, stronger loyalty, and deeper customer wallets in the future.

Let Ario show you how financing and their many other credit-as-a-service options can work for your business and your customers today!

Ready to get started? Click here to learn more about Ario's digital lending platform.

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A number of factors contribute to your credit including what you currently owe, how promptly you’ve made previous payments, how much credit you’ve used, and other general information about your business.

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A number of factors contribute to your credit including what you currently owe, how promptly you’ve made previous payments, how much credit you’ve used, and other general information about your business.

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