The loan range

It's very rare that I grudgingly agree with Mick Hucknall. The Simply Red crooner rarely inspires me to go out and buy one of his group's albums. However, one of their very first hits, 1985's Top 20 stalwart Money's Too Tight To Mention undoubtedly strikes a chord in today's morbid economic climate.

Mind you, the song's actually by The Valentine Brothers, so fortunately that's let me off the Hucknall hook.

Everywhere we read, see and hear in today's society, money is the root of some serious evil. Banks are in big trouble, mortgage lenders are in similar dire straits, while famous high street names like MFI and the beloved Woolworths have paid the price of the economic crisis with reports of what the big cheeses like to call "administration" (a fancy word for closure). Journalists still seem hell-bent on adding fuel to the fire with non-stop prophecies of doom and how before long we'll be living off nuts and berries and replacing technology with the abacus.

Against this backdrop, the government plans to deal with the situation by, um, borrowing more: a situation akin to getting healthier by eating burgers and fries non-stop for a year. Much as it kills me to agree with anything the Tory party say, but their dire warnings of the future have a ring of truth about them. Gordon Brown's plans to spend his way out of recession indicate serious problems for the future with higher taxes and even greater amounts of debt.

What's more, the rates of lending have, for the most part decreased. You may find it harder to get a personal loan or a mortgage - kind of ironic, given that politicians think it's OK to do so. Small business chiefs have also recently requested that Chancellor Alistair Darling should help with a £1 billion lifeline to stop many small firms from going bust, by setting up a survival fund to help the UK's 4.7 million small businesses get through the looming recession.

One exception to the rule fortunately happens to be franchising, and in this instance borrowing money is justified (especially given the exorbitant amounts of one or two franchises that would make a grown man weep). Banks regard franchising as a safer bet, since the majority of franchises actually work out. Providing that potential candidates come up with a good, well worked out plan, the chances are that they'll succeed in paying back the money. HSBC's head of franchising, Cathryn Hayes says: "Because of the wide spectrum of industries in which franchises operate, the risk is diversified for the sector as a whole. The risk of failure is further lessened by the support you will receive from the franchisor. It is in their interest to ensure that your business remains in good shape during this economic turmoil. Most of the high street banks have specialist franchise units and therefore understand the franchise model. Applications from potential franchisees are likely to be considered more favourably than a conventional start up"

Richard Holden, head of franchising at Lloyds TSB, says that one of the most important aspects of obtaining a bank loan is to devise a strong business plan. A good plan will allow you to have a clearer understanding of what is required (a benefit in itself), and will prove to the bank that you have a clear vision in your head of where the franchised business will be heading. "The initial objective of a business plan is to help you raise finance for the business - however it will also help you understand what you wish to achieve and is an essential document to review the performance against your projections. The plan should demonstrate that you understand the business opportunity and unsurprisingly, a bank will only lend when it has a very good chance of being repaid."

Unfortunately, it's not solely up to the bank to provide the capital required. You'll need to find at least 30% of the start up costs, so before you consider going into franchising, you'll need to have enough money pugged away - call it the equivalent of a mortgage deposit. Also bear in mind that less established franchise systems may need a greater capital stake. And don't forget that liquid capital is required for those early days of franchising which may need a bit of spare cash to cover the mortgage, rent and bills during that initial starting out period. Calculate the figures in a worst case scenario and make sure that you have enough money to cover any eventualities.

If you're worried about the finance, don't just take any franchise that you come across because it's cheap. That's not to say that cheap franchises are the wrong ones to go for - far from it, there are some excellent value for money franchises out there that frankly, deserve greater recognition. The problem is, it may not suit you for a multitude of reasons. You may have little or no experience of the field that the franchise is in. You may have little or no understanding of that particular field. And because a franchise requires a long-term commitment, you need to have some knowledge or even appreciation of the chosen sector of your franchise. Don't settle for a franchise that may not suit you just because it's in your price range.

A good idea is to shop around for franchise bank loans - talk to different banks to make sure that they know what they're talking about and that they have the right amount of knowledge to support your aims and ideas. Richard Holden says that the ones who understand franchising and your own particular business needs will be worth considering. Banks that boast a franchise unit are normally the safest bets. It's also worth checking out which ones offer the best deals and support. Either pay a visit to your shortlist of banks in person (which will allow you to make that initial contact) or trawl the web for any potential lenders. Understand the different incentives and offers, such as free transactional banking terms, payment holidays as well as the charges that the banks may put on you for security costs and valuation fees. On the other hand, it's also worth familiarising yourself with all the business jargon, legal terms and small print that may prove to be a problem.

Nobody's going to argue that we're on shakier ground when it comes to finance. The economic climate means that small businesses and, franchises, have tough times to weather ahead. But if you have enough money for a "deposit" and sheer willpower, then there's a strong chance that the banks may throw you a lifeline for your franchise.

• Thanks to Richard Holden for additional material