You CAN beat credit crunch

You CAN beat credit crunch

By: Linda Whitney

THE CREDIT crunch does not mean abandoning your plans to set up in business. A franchise could be your best bet, because banks will more readily lend to franchisees of established franchises than to individual entrepreneurs.

'There is still no shortage of funds to lend to good quality franchisees,' says Mark Scott, director of franchise development at NatWest Bank.

'It is now more difficult to borrow for a non-franchised start-up, especially in some sectors, such as estate agency,' says Mr Scott.

'But you would find it easier to borrow for a franchised estate agency because you have the backing of the franchisor.' Banks will typically lend up to 70 per cent of the total franchise investment, provided you and the franchise are good credit risks.

'We expect you to supply £15,000- £20,000 of the total £65,000 investment from your own, unborrowed, funds, because it shows commitment to the business,' says Simon Dalziel of care franchise Bluebird Care, whose management fran- chisees run teams of domestic care workers. 'The rest of the start-up costs can be made up of loans paid back over the franchise term, and an overdraft to provide working capital,' says Mr Dalziel, who heads the team that won Franchise Recruitment Team of the Year prize in the recent Franchise Marketing Awards.

Most franchises levy ongoing monthly management fees, usually around 10-12 per cent, based on turnover. Some also take an ongoing marketing levy. Get written details of all the financial aspects.

'Our literature includes details including start-up costs, working capital, equipment, stationery, marketing materials, clothing, the deposit and livery for the vehicle and £1,000 for IT and office equipment,' says Kelly Smith of NBC Bird and Pest Solutions, which won the best recruitment literature award at the Franchise Marketing Awards.

NBC franchisees use birds of prey to keep feral birds off buildings, and provide a pest control service. Total investment is £32,000, and monthly management fees are 12 per cent plus a 2.5 per cent marketing levy.

GET HELP from an accountant who understands franchising. It is easier to raise money if you choose an established franchise which has long-term relationships with the franchise departments of the big banks.

The bank will check your financial situation, credit history, existing funds and business skills. It may want to take a charge on your home.

If you have no assets, the bank can offer you access to the Small Firms Loans Guarantee Scheme, which guarantees 75 per cent of your loan.

You also need a business plan. The franchisor can help you draw it up, but ultimately it must be your own work and banks will check that you know it inside out.

Bluebird Care, NBC 0800 169 9646. For a list of accountants affiliated to the British Franchise Association visit www.thebfa.org.

FRANCHISE

YOUR business can be a family affair. Many franchisors like husband-andwife teams to run their franchises, but some franchisees go further.

Fiona Thompson runs seven Driver Hire recruitment franchises in Scotland and the North of England, employing husband Stephen and sister Heather.

' I am on maternity leave and if did not have the family I would feel less comfortable about taking time off,' says Fiona, 32, seen here with Stephen, 31, son Teddy, 20 months, and daughter Christy, ten weeks.

Stephen, who is operations manager, briefs her about the business each evening when he returns home to Lanark.

'You must employ family members for their skills, not just because they are family,'

says Fiona. 'I recruited Heather because she was already working in recruitment, and she recommended I recruit Stephen because he had the right attitude for the job. It was only later I married him.' Before getting into business with your family, have a strategy in place for dealing with disputes.

Fiona says: 'We avoid arguments about business, because everyone sticks to their area of responsibility, only coming together to make decisions about strategy, business plans and budgets.' John Warren of Driver Hire says: 'Our franchise network includes many family partnerships running businesses together.' Mr Warren is looking for more franchisees with £45,000 to invest, £15,000 to £20,000 of which must be liquid capital.

¦ Driver Hire 01274 551 166..