Banks and their purse strings

A couple of blogs ago I said that it was outrageous that banks were still keeping our money to themselves – but it was a rant for another time.

Well, that time has come.

Or at least I wanted to rant today, but it seems as though there has been a loosening of purse strings, at least when it comes to lending to franchisees. That’s my experience over the last couple of weeks or so and perhaps you people out there in Enterprise Britain can let me know whether this is true or not.

This is what I’ve seen recently that makes me think that there’s some movement.

One franchisor we work for has suddenly seen an upsurge in new franchisees making it all the way through their recruitment process. We train new franchisees for them every month and the numbers on the most recent courses have been like this: four, six, ten (next week) and fourteen (scheduled already for the July course).

Another franchisor we work with runs four franchisee induction programmes a year… the July course will have the greatest number of franchisees on it since 1874. Well maybe a slight exaggeration, but it’s their largest course for a number of years.

So, what conclusions can we draw from this, admittedly limited, data?

Remember, recruitment pipelines have been bulging for a while, but have experienced a blockage when it comes to securing funds. On the face of it, it seems as though there has been some finance released into the system. But who are the banks lending to? The two franchise operations I’ve been talking about are from entirely different industry sectors, appeal to different types of franchisees and do not relate to each other in any way… but they do have one thing in common.

They are both well known franchise concepts, they’ve been around for many years and have established track records. (I know that’s three things they have in common, but you get the point).

In terms of what the banks are lending, their criteria do not seem particularly onerous. Franchisees seem to be asked to put up something like 30% of the borrowing, with the banks putting up the other 70% at a rate of between 3% and 5% over base rate. These figures are conjecture and vary from case to case.

The point is that there seems to be a release of funds which is leading to more new franchisees. If we look at this from a bigger picture point of view, it could be that franchising is going to lead Enterprise Britain out of the recession by recovering first… as long as these green shoots are real green shoots and not just a false spring.

Please leave a comment - we all like them