Yet Encore can't grow unless its franchisees can get financing to start their business. So the company decided to start an internal financing program. "We hope to remove any financial road blocks that may be preventing highly qualified and specialized health care professionals from starting up an Encore Medical franchise," said Greg Tucker, chief executive of Encore's parent, Southern Home Medical.

That Southern Home is willing to take the risk of internal financing is a sign the company has the ultimate faith in its concept, in future demand for its services and in its ability to pick strong franchisees. But the move also says this: Franchisors are resorting to often-drastic steps to overcome a credit market that is full of more hurdles than it has been in decades.

The yearlong credit crunch has had a significant impact on numerous franchisors - slowing growth of existing units and even reducing the number of companies that started franchising. According to the franchise information firm FRANdata, the number of new franchisors in 2007 was cut almost in half. And based on numerous reports, GE Capital Solutions has slowed lending.

Two-thirds of small employers surveyed this summer - before the tightness evolved into a full-blown crisis - said the credit crunch affected them, according to the National Small Business Association, or NSBA.

Big companies have been affected, too: DineEquity has seen its stock price drop by more than 50 percent in recent months amid concerns that it won't be able to sell Applebee's locations to franchisees. That's a key element in the company's plan, because it would than use money from those sales to pay off the debt acquired when IHOP bought Applebee's. Several other companies also are actively selling company units.

In addition, the hotel chain Marriott said that profits would be tighter in 2009 largely because of the credit markets. Franchisees at McDonald's are reportedly having trouble borrowing money to implement its new drink program.

Complicating matters for many franchisors is the fact that they operate in industries in which growth is currently a problem - like restaurants, an industry that has been beset by high-profile bankruptcies and mounting concern over market saturation. So franchisees who operate in those segments automatically will have a tougher time finding financing, because lenders have visions of Bennigan's in their heads.

Tightened credit markets can keep businesses from taking out short-term loans to steady cash flow, often resulting in layoffs. It also keeps franchisees from being able to get loans to build units, slowing franchisors' revenue growth and trimming the top line at a time when sales in many industries are slowing because of general economic problems.

Various economic projections say that it will be at least until 2010 before the economy picks up again.

Not long ago, banks and investors were eager to lend to franchisors and franchisees. Now, companies "are trying to get lenders to call them back," said H. Reid Sherard, chief executive of Capital Growth Advisors.

"Banks used to line up to do franchise deals," said Ron Feldman, CEO of Siegel Capital. "Now the opposite is true."

At the very least, franchisors clearly are doing more to help franchisees get the money they need to open their doors. Several financing consultants and advisers said business has been booming since the credit crunch took hold earlier this year. "The credit crunch has really worked in our favor," said Harry Barnes, sales and marketing director for Banking Syndicators of America, a two-year-old company that helps small firms, including franchisees, form buying groups for financing. "People are looking for creative ways to get financing, and to manage every dollar they have."

"It's helped our business," said Feldman, whose company acts as a liaison to help small and mid-sized franchisors and franchisees get bank loans. "People who wouldn't return our phone calls a year ago are now calling us."

The tightened credit markets may lead some franchisors to consider granting lenders security interest in franchisees - which would allow them to take over the franchise in the case of a default and the closure of a unit. Traditionally, franchisors haven't allowed that - lenders usually only get interest in the physical assets. Yet Kenneth Costello, a franchise attorney with the California firm Bryan Cave, said many companies may rethink this in the face of the credit market - indeed, he has recently worked on several deals for a franchisor that for years resisted such a step.

Such deals are complex, Costello said, and would only work for multi-unit franchisees rather than a single store. However, "with everything going on in the capital markets, it may be something more franchisors are willing to consider."

Still, despite the tightened market, banks haven't stopped lending money altogether, for a simple reason. "People who have money have to put it out to make money," Sherard said. Yet when they do put their money out there, lenders are going back to the basics, funding good concepts with strong financials, shying away from newer franchises with few units and no track record. That may make it tougher for new franchises to get a foothold in the market.

They're also shying away from making smaller loans. This hurts companies with small initial investments, like home-based franchisors. Such small business loans of under $125,000 have a higher default rate, and banks may not think the amount is worth the effort. "It's the same reason why you can't get a $50,000 first mortgage," Feldman said. "The cost of underwriting it or processing it is the same as a jumbo loan."

Craig Weichmann, managing director of Mastodon Ventures, said that companies seeking loans should present their positive information, especially comparative store sales, but also cost savings, margin improvement or boosts from marketing programs. "The key is to focus on positive factors," he said.

And get creative. "Think like a lender thinks" when trying to work out deals, Weichmann said. He added that borrowers could request a three-year note with a balloon payment, instead of a five-year, which may ease lender concerns about risk.

The lending environment also has the potential to change the franchisee market. Banks are only loaning to people with experience who have money. That may result in a market in which fewer, larger franchisee companies are buying up units that are being sold. Jerry Jones, managing member for Funding Solutions, said franchisees need additional collateral, income outside the company and industry experience.

This will put pressure on franchisors to be choosy about the franchisees they let in their system. Weaker candidates will be much less likely to get loans. Companies will have to keep their eye on project cost, and they'll have to be more methodical and concentrated in terms of unit growth. "I think they're having to strengthen their approach to franchising," said Jones.

And that, advisers said, could result in stronger systems.