An ongoing investigation into Small Business Association (SBA) “liar loans†provided by banks to franchisees has all three sides – franchisees, franchisors and banks – pointing fingers. The investigation revealed that some banks had prior agreements with franchisors to service their franchisees’ SBA loans regardless of the qualifications, and loan officers would not diligently evaluate the loan applications. Now, franchisees that are being held responsible for failed loans are arguing that franchisors provided false projected earnings so that the franchisees would get their loans. The problem is causing a shakeup at the SBA and could mean wholesale changes with how banks provide loans that require approval based on projected earnings. For more on this continue reading the following article from Blue MauMau.
Franchisees of Huntington Learning Center, The Coffee Beanery and more say that the system was stacked against them. What irks them is that their franchisors had access to the real numbers while they struggled to get a scrap of financial information, any information, from a single store.After they signed their franchise agreement, bogus financial projections were released and often orchestrated by their franchisor for their loans. Although they were held completely accountable, the system was built to hide the numbers until it was too late. Nor did any of the agencies facilitate the deal for the franchisee. Read more.