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Has the credit crunch impacted on franchise finance in the UK?

There’s no doubt that conditions over the past few months have been tough.  As the credit crisis has taken hold, businesses that have not seen its effects in some shape or form are few and far between. Richard Holden, Head of Franchising at Lloyds TSB says, the question many franchisors should be asking is what impact will the crisis have on their sector and can they and their franchisees still expect support from banks?
 
The fact is that the credit crunch is likely to be with us for a while longer. Various surveys of both households and companies indicate that we will continue to see a softening of growth in the economy, as businesses and homeowners cut back on spending. And of course, consumer and business confidence has been dented as well.
 
But none of these developments are signs of a recession and for the time being at least, the indications are that the UK will avoid the more serious extremes of an economic slowdown.
 
That’s great news for all businesses, and franchises are no exception. But the fact is that for many other reasons franchise businesses are well placed to weather any storm.
 
The tried and tested business model that a well established franchise provides together with the training and ongoing support which they offer, means that franchising is often seen as a less risky way of getting in to business.
 

Financial support
But the position of individual banks counts for a lot too. Although the economic picture has changed dramatically in recent months, Lloyds TSB is still very much committed to developing long term relationships with customers and that will continue even through more challenging times.
 
Franchises, like any businesses, may require start up and development funding – and with its AAA rating, Lloyds TSB is in a strong position to help both franchisors and franchisees looking for finance.
 
However, simply because the economic climate permits, is not a reason to establish a franchise, clearly a huge amount of thought needs to go into any decision. Research is a must, for any prospective franchisee, as is getting the right professional advice.
 
The best bet, when you or your franchisees are looking for expert advice is to approach the dedicated Franchise Unit, within your chosen bank. The experts within this specialist unit will be able to provide advice on the level, structure and terms of the banking and financial support available.
 
Lloyds TSB’s Franchise Unit for example, evaluates franchise systems operating in the UK and carries out a credit risk assessment of a particular franchise to ensure they are prepared to lend to individuals looking to make an investment. It also monitors existing franchisees’ customers to ensure they continue to perform over a period of time.

The bank’s franchise team will also regularly review franchise systems to ensure that the franchise package remains value for money and the level of training and support provides the franchisees with the best possible opportunity to operate their business successfully.

Look for
You should ensure that the banks franchise departments are regularly updated with the developments of your franchise opportunity including any changes to your prospectus and franchise agreement. The latest available financial information relating to the business should also be provided. This will ensure that the bank is well placed to deliver prompt and professional support when it’s required.
 
So, the bottom line is, although the economic climate is tough Lloyds TSB continues to deliver innovative solutions and flexible funding packages, incorporating a range of tailored services, to meet the very individual needs of both franchisors and franchisees giving them every chance to prosper.

Contact
Richard Holden
Head of Franchising
Lloyds TSB Bank plc
Tel: 07802 324018
E-Mail: richard.j.holden@lloydstsb.co.uk
Website: www.lloydstsb.com/franchising

Richard heads up the Lloyds TSB franchise team and is a regular contributor to trade publications and national press. He is on the panel of judges for the Franchise Marketing Awards and regularly speaks at franchise seminars and exhibitions. Lloyds TSB is an affiliate member of the British Franchise Association and is proud to support the growth of ethical franchising in the UK. It has business bankers in all its local business centres helping around 100,000 businesses start up every year.