Home | I wouldn't buy it | Lending Franchise Review

Lending Franchise Review

The franchise Liquid Capital provides businesses with short-term financing that is secured by receivables.  Think payday loans for businesses, cash now secured by reliable future income.  A fictitious example of this works would be my law firm – clients typically pay their legal bills as late as possible, so if I needed a reliable inflow of cash each month, I could pay a fee to Liquid Capital to give me cash on a predictable timetable.  My responsibility would be to pay back Liquid Capital when the client pays their legal bill.

In theory, the business model works can work great.  Theoretically there are high margins on lent cash, long term working relationships, many customers that need this service, professional atmosphere, and you are providing a needed service to the business community.

BUT…..In real life, the business model struggles.  As this article states, one franchisee said it took him a year to land his first client!  In the past 4 years, 19 Liquid Capital franchisees have closed their doors.  The franchisor also requires a minimum volume of lending of each franchisee, and failure to achieve volume goals can be termination “for cause” according to the franchise agreement.  If you are desperate for clients, inevitably you will lend to riskier borrowers than you would like.  And, collections are a real pain nowadays in the United States with pdfall the laws protecting borrowers and limiting communication and other means to collect debts.  If you are extremely plugged into the community, then potentially this franchise will pay off.

I wouldn’t buy it.

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.

One comment

  1. Interesting article. This article is a great example of what people who don’t understand the business model think about it.

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