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.

Related reading:

• Part 1: SBA Rebukes Banco Popular for Liar Loans | BMM
• Part 2: Franchise Liar Loans Spread among Banks | BMM
• Part 3: Advice on SBA Liar Loans | BMM
• Liar Loans Pt 4: SBA Franchise Lenders Hit | BMM
• Part 5: Different Books for Different Folks | BMM
• SBA audit report of Banco Popular's loans to franchisee borrowers (pdf) | SBA's Office of Inspector General
• Franchisees Kept Out of Earnings Forecasts for Their Own Loans  | BMM
• SBA Liar Loans Are Not Surprising  | BMM
• Loan Broker: "SBA Liar Loans a Problem"  | BMM
• How I Figured Out SBA Liar Loans  | BMM
• SBA: Franchises and independent small business loan risk compared  | BMM