Matco Franchisees Allege SBA Loan Fraud

I know for a fact that attorneys right now are salivating over this issue - an issue that franchisees NEEDED to be made aware of - especially potential franchisees. This guy talks about doing better due diligence. What better advice could I have given over the fact that franchisors were fraudulently fixing proforma numbers either directly or in cahoots with bankers and loan consultants to get unsuspecting new zees sucked up into a SBA loan?

Blue MauMau
November 15, 2011

Matco Franchisees Allege SBA Loan Fraud
Janet Sparks


TD Bank, Chinatown, D.C. by Matt Bisanz, Wikipedia

Franchisees David Villano III and his father David Villano, Jr. are accusing Matco Tools, with accomplice TD Bank, of devising a secret scheme that allowed the franchisor to sell franchises through fraudulent small business loans.

A lawsuit filed yesterday in New Jersey federal court claims Matco Tools doled out inflated annual performance projections to Commerce Bank, acquired by TD four years ago. A New York post article explains the tactics they used,

Matco’s upper management … devised a scheme to secretly make income projections to TD and other SBA lenders that would only be disclosed to the SBA lender, in order to satisfy the bank’s lending criteria.

The reporter says that the bank turned a blind eye to the inflated projections. The loan scheme allegedly was in operation over a four-year period, dating back to 2003.

One of the supporting documents in the federal court complaint is from Blue MauMau's 2011 article on the 25 worst franchises to buy by SBA failure rate, Exhibit F. Matco Tools is ranked 23rd.

As of August 17, 2012

1. Just say no
Terminate the SBA loan program. No more SBA loans. Make you business case to a bank that will be taking the risk with their own money with no SBA backing. Then they'll have more incentive to weed out the bum deals. A lot of people took out SBA loans who should not have gotten loans. A lot of Zors got franchisee fees and royalties that they wouldn't have, if the prospective Zee couldn't get an SBA loan, which they did even though they shouldn't have.

Heck, terminate the SBA. What does the SBA do anyway?

If, as a prospective Zee, you have a good deal, then you don't need SBA to get a loan.

2. SBA Loans
michael webster
GB asks: " Heck, terminate the SBA. What does the SBA do anyway?"

Well, one thing it does is to publicize the worst franchise systems in terms of bad loans. This information being public is worthwhile.

3. I ahve always wondered what the SBA did to justify its
existance. If that is what it does, plus throw away money subsidizing bozo franchises, then I am with Ron Paul. Get rid of it.

4. Good thing you're not…
Solomon says: " …then I am with Ron Paul. Get rid of it. "

Good thing you're not with Rick Perry, he wouldn't remember what it was he wanted to get rid of…

5. Very funny. What you forget is that in Texas we have people to
remind us when we forget something. Perry would take some reminders with him to Washington. George Bush had the CIA to remind him that Irag had weapons of mass destruction. Without his reminders in the CIA we might not have remembered to have the Iraq war. We certainly would never have remembered who it was that committed the 9-11 attacks, resulting in our missing out completely on the opportunity to repeat the calamity that happened to the Russians in Afghanistan.

What? You forgot that the CIA is essetially a reminder agency? Gime a break, please.

And don't forget the Culper Group.

6. Exactly
Ray Borradale
I still chuckle every time I think of our FCA winding up to push for a similar scheme for Australia. They were already out in public waving the SBA flag and telling government about wonderfull results coming from SBA loans to franchising. And then BMM broke the story. FCA went quiet. he he hehehe he ….

7. Re: just say no (granville)
Old Sword
Granville, I agree with you 1000%. (Yes, ona thousand). This is exactly what I have been "preaching" about for years. The problem is not me nor other franchisees-it is the franchisors. Without this financing the the franchise systems that do not work (in my estimation at least 60%) would no longer exist. Banks would absolutely require historical data regarding first and second year franchisee gross and net revenue and the bad systems would not meet bank standards. The franchisors want and need the SBA and have figured out how to game the system so they are not only fighting for status quo but INCREASED funding. Its one big sc#m.

As for your other post and "patting myself on the back". You might want to look at my posts over the years starting in 2009 when I found this site - franchisor apologists and even franchise attorneys attacked my argument, and me. The people who know are fully aware that I brought this to the public eye and I, and only I, fought this through the system while everyone, and i mean everyone, told me I was wrong. Even franchisees refused to help telling me they will join in AFTER something is found in my favor - quite frankly, they can go to hell for all I care. I am still waiting for Quiznos franchisees to wake up because it is this very issue that sunk them. They were gamed from the beginning but they are too damn stupid to work with me - their franchisor and their financiers knew full well they were sunk before they even signed the agreement - all you had to do was look at the historical data.

My shoulders, and my back are just fine. Although at times I realize since there is little to no help the weight of thousands of franchisees on your shoulders can be quite daunting.

But, with all due respect, this issue pales in comparison to what you are going through. I wish you well.

8. Veterans Look to Matco Franchises For Post Military Success
As one of the top 10 most popular franchises for military veterans according to the most recent VetFran survey, the International Franchise Association's Veterans Transition Franchise Initiative, Matco Tools has been committed to ongoing support of those who have served our country.

God Help Us All!

9. Matco Tools: using a new tool in the legal arsenal
Old Sword
It took over 3 years of my researching, writing, emailing, calling, yelling, traveling and fighting to wake people up to this massive fraud. This is just the beginning of what will be a rude awakening to all the financial institutions (and there were many) who were complicit in this scheme to defraud. To all of you who tried to stop me and thought this "Old Sword" would be ineffective I have but one thing to say (provided to me by a friend here on BMM):

"thenne he drewe his swerd Excalibur, but it was so breyght in his enemyes eyen that it gaf light lyke thirty torchys." (from Thomas Mallory's writings on King Arthur).

10. careful there….
OS begins: " To all of you who tried to stop me and thought this "Old Sword" would be ineffective I have but one thing to say …"

You're going to dislocate your shoulder reaching around to pat yourself on the back like that.

11. but you have to admit
Ray Borradale
it seems almost everyone on this planet gives up before they start. Little folk can move mountains if they can handle the aholes on the mountains throwing bullsiht.

12. the pot calling the kettle black
And yet with all your writing you keep conveniently leaving out the FACT you deliberately falsified your loan application! You got what you deserved. You were dishonest and you got taken, hardly a cause for sympathy.

13. The kettle is about to boil over
Old Sword
Ahhh yes, my favorite two guests. Your franchisor "you sent in the #'s, you were the one who lied" crap is falling on deaf ears now, isn't it? Not only do the lawyers not believe it anymore but the SBA, after seeing proforma after proforma with the same numbers thru many multiple systems, doesn't believe it either. They now fully understand this was a concerted effort by the franchisor, their partners and the banks to get the SBA loan approved and shove the risk losses onto the taxpayers.

Then there is of course the "you are too chicken to give your name" BS. Both tired franchisor tactics to change the argument. So, why don't you both prove my argument wrong? Oh, that's right, with TWO federal government investigations proving my thesis correct, you can't.

Now, with this charade being public, both of you are unable to sell your crap due to banker reluctance to extend financing to many franchise systems. As scrutiny intensifies it will only get worse. BTW, you see these lawsuits? They are "only the beginning" (I loved the group Chicago, didn't you?). Expect class actions soon. I can't wait!!

In the meantime your earnings have been reduced since your crap won't move. And guest, its MATCO not MAACO but I guess sh*t by any other name is still sh*t. Who cares what the name is, as long as you get that commission off of an unsuspecting family's life savings. Being the nice guy that I am I will extend to you some sage advice I and all my franchisee friends received from our franchisors when we could no longer pay our royalties/rents/home mortgages/food bills (the IFA or franchise attorneys must teach this because it has been provided to zees across many systems) - You ready?: Go get a second job!! There, I hope that helps you guys as much as it helped all of us.

14. Loan applicants knew their numbers were garbage, too!
You are so self righteous. You defrauded taxpayers as well.

15. Guest made money off the SBA scam
Ray Borradale
1. Franchisees who ended up with SBA loans were not trying to rip anyone off. Obviously they wanted a loan but they fully intended to pay the loans off.

2. Taxpayers were burnt in the SBA scam and franchisees were the only others burnt in the SBA scam.

3. There is a long list of those who profited from the SBA scam and it was their intention to profit from the SBA scam.

4. Those who want to create some level of damage control for the SBA scam in a distorted belief that the scam will return to its former performance attempt to divert attention by continually pointing the finger at franchisees who fully intended to pay back their loans.

But Guest; free speech is a wonderful thing. Even bottom feeders get theirs.

16. Re: loan applicants not self-righteous…just right
Old Sword
No, we didn't. You can keep trying to say this as much as you want but it doesn't make it true. In fact, this is exactly the argument franchisors try to pull with individual franchisees to scare them. Unfortunately for your argument, the loan applications are all too similar. As you look into each system it is the one common thread throughout - and the applicants all say the same thing "these numbers were given to us by the franchisor/franchisor cohorts".

Last thing, no one would have even applied for these loans had they known what the real numbers were. Placing your home and entire financial life on the line to buy into a system knowing you were almost definitely going to LOSE hundreds of thousands of dollars - do me a favor and come up with a better story/excuse than that. You franchisors are in for a rude awakening.

17. New Look
michael webster
OS, like the new look!

18. Re: The kettle is about to boil over
2011-11-17 21:26
I don't expect much to happen with SBA loan practices. The amount of loans guaranteed under 7A and 504 programs will not change. While certain bad-actor franchise concepts may have a difficult time getting approved.

With all that being said, Old Sword you haven't gained sympathy or support by your annoying attitude and your own foolishness through your participation in your fraudulent Huntington SBA guaranteed loan. You also have not been made whole for all your triumphant efforts.

19. Despicable fellow
Ray Borradale
Now that OS has let the dogs out and with BMM coverage I’d expect many more cases like this to come forward. Perhaps we should be asking which brands are unlikely to be caught up in an investigation.

I don't expect much to happen with SBA loan practices. Guest

Not much had to happen in the first place. The franchisor projections only had to be verified as having some basis in reality. I would now expect SBA loans to franchising to drop dramatically until a lot more of franchising is not compelled to fabricate potential profit. Give them 10 or 20 years … or so.

20. SBA Change
michael webster
Guest states: "I don't expect much to happen with SBA loan practices. The amount of loans guaranteed under 7A and 504 programs will not change. While certain bad-actor franchise concepts may have a difficult time getting approved."

Are you referring to the total amount of loans?

Are referring to SBA loan guidelines or actual practices?

Does the SBA keep or publish a list of franchise systems that for reason other than control won't get an SBA loan?

21. Re: Re: The kettle
Old Sword
First off, could care less about sympathy. As for SBA loan practices - keep telling yourself that. And ask yourself one question: Who has been right about this issue every step of the way - you… or me?

22. Re: Re: Re: The kettle
I'm right that you are a dislikable fellow. I'm right you participated in SBA loan fraud. I'm right you have not been repaid any of the money from your Huntington business failure. I'm right that you could have engaged the BMM community in a more productive way and you chose not to do so.

23. Actually, Old wad is a pretty good sort. He made mistakes, but
we all do that. His information is correct, and he is the only one who has fought the fight despite his own experiece.

It takes more guts to stand up when you have been part of the problem. I admire that. His being part of the problem does not disqualify him fro my respect because that is the way the business has been run. Thousands of people in hundreds of companies have the equivalent involvement in various schemes. That does not lessen the quality of the information or the need for the relief he seeks.

If you are without sin - as I am sure you think you are - consider yourself to have thrown the stone. Does it feel good?

24. RE: Yes, I am a pretty good sort.
Old Sword

Once again, thank you for your comments. People like "guest" don't get it. I could have been more helpful to BMM discourse? Is he nuts? I know for a fact that attorneys right now are salivating over this issue - an issue that franchisees NEEDED to be made aware of - especially potential franchisees. This guy talks about doing better due diligence. What better advice could I have given over the fact that franchisors were fraudulently fixing proforma numbers either directly or in cahoots with bankers and loan consultants to get unsuspecting new zees sucked up into a SBA loan?

He is right about one thing though. I am dislikeable. If that really bothers him he can get in line - it starts behind my wife…and mother.

25. Old sword
Barbara Jorgensen
You are very funny. Your picture cracks me up. I wish there were people who had the guts to disclose the corruption that is obvious in the world of franchising. You have brought alot of insight about SBA loans to BMM.

What I am concerned about is the whole picture of corruption in franchising. People who have a history of being established, are getting fleeced. We never got an SBA loan. Our ability to live a prosperous life was taken away from us and many people. It is not right. All they can do is throw DD. I believe it is not only about franchisors fraudulently fixing proforma numbers either directly or in cahoots with bankers and loan consultants. It is about being fraudulent from A to Z. That does not include only the numbers. They can legally be fraudulent about everything and get away with it.

Keep up the good work.

26. SBA scams are a symptom of franchisor culture
Ray Borradale
It seems there will be an awful lot of franchisors found to havemanipulated and abused the SBA loan program. Anywhere there is a weakness there are those franchisors that will find it and use it. Then there is the imbalance of power that goes way past the imbalance in contractual power. The marketing of 'franchise' is akin to promoting all the attributes of tobacco and self-harm. Has anyone seen my razor blade …… I have too much money …..

27. Comment moved
This comment is off topic and it has been moved here.

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