Lendio: The Truth About the Payday Loan Industry (2024)
Lendio is in the business of connecting people seeking loans with lenders. They market themselves as a loan marketplace. It is led by Brock Blake as its CEO. Lendio was founded in 2006 and has since grown to 120+ locations.
How is Lendio Franchise Positioned in the Professional Business Services Industry?
The payday loan industry fills the need for small, short-term credit throughout the country. Analysts estimate that 20,600 payday advance locations across the United States extend about $38.5 billion in credit to millions of working Americans in 19 million households. In addition to being a valuable source of credit for many consumers, the industry makes significant contributions to the U.S. and state economies employing more than 50,000 Americans who earn $2 billion in wages and generating more than $2.6 billion in federal, state, and local taxes.
How Much is a Lendio Franchise?
The initial Lendio Franchise Fee is in the range of $34,500 to $46,000. You have to pay this upfront fee when opening a Lendio franchise.
Lendio Franchise Cost
The estimated total investment necessary to begin the operation of a Lendio Franchise ranges from $45,650 to $117,100. The following costs are part of the upfront costs included in the initial investment for a Lendio. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Lendio franchise in 2022.
| Type of Fee | Amount | To Whom Payment Is To Be Made |
|---|---|---|
| Initial Franchise Fee | $34,500 to $46,000 | Us |
| Opening Kit | $1,500 to $7,500 | Us |
| Rent – 3 months | $0 to $9,000 | Landlord |
| Utility & Security Deposits | $0 to $1,000 | Various Suppliers |
| Leasehold Improvements | $0 to $5,000 | Various Suppliers |
| Furniture and Fixtures | $0 to $2,500 | Various Suppliers |
| Computer System, Equipment & Supplies | $1,000 to $7,500 | Various Suppliers and Us |
| Business Licenses | $250 to $2,500 | State and local government, as applicable |
| Legal and Accounting Fees | $1,000 to $2,500 | Various Suppliers |
| Initial Marketing Expenditures | $3,000 to $12,000 | Various Suppliers |
| Insurance | $1,000 to $1,500 | Various Suppliers |
| Technology Fees – 3 months | $900 | Us |
| Travel Expenses for Initial Training | $1,000 to $7,200 | Various Third Parties |
| Additional Funds – 3 months | $1,500 to $12,000 | Employees Suppliers |
| TOTAL | $45,650 to $117,100 |
Lendio Franchise Requirements
Lendio requires a liquid capital of between $55,000 and $65,000. The steps you need to take in order to start a location are given in the graphic below:
Owning a Lendio Franchise Requires Ongoing Fees
| Type of Fee | Amount | Due Date |
|---|---|---|
| Business Generation Fee | 30% to 70% of Gross Revenues, subject to a minimum quarterly Business Generation Fee | Payable twice monthly by check or electronic funds transfer |
| Extraterritorial Fee | 5% of Gross Revenues received respecting Clients serviced outside of your TPR | Payable at same time and in same manner as Business Generation Fee |
| Shared Account Fee | 30% of Gross Revenues received from a Client in another franchisee’s TPR | Payable at same time and in same manner as Business Generation Fee |
| Technology Fee | Currently $300 per month | Payable at same time and in same manner as Business Generation Fee |
How much do Lendio franchise owners make?
Lendio does not provide any financial information on how much its franchises make but advertises a 70-30 revenue split between franchisee-franchisor for the commissions that they earn on the loans.
2021 Lendio Average Franchise Sales Estimate: $139,433
| Initial investment (midpoint) | %Profit margin of average franchise sales | Estimated Profits | Time to recoup investment |
|---|---|---|---|
| $81,375 | 30% | $41,829 | 4.5 years |
| $81,375 | 40% | $55,773 | 4 years |
| $81,375 | 50% | $69,716 | 3.75 years |
Based on the median sales provided by Lendio’s franchise locations, at an average of a 40% profit margin it will take around 4 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 40% profit margin which would elongate getting a return on your investment.
Is the Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Lendio franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
When you go to sell a Lendio franchise based on the revenue multiple of 1 and net sale estimate in 2021 of $139,433, it would sell for $139,433. This is significantly more than the midpoint investment of $81,375 and will recuperate your initial investment in full.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Lendio (Franchisor) Income Statement Key Insights:
Statements of Income
| 2021 | 2020 | |
|---|---|---|
| Revenues | ||
| Marketplace lending commissions | $13,762,044 | $4,029,034 |
| Franchise fees | 561,782 | 339,418 |
| Training fees | 290,697 | 230,500 |
| Technology, brand, and royalty fees | 467,106 | 135,082 |
| Total revenues | 15,181,629 | 4,734,034 |
| Operating expenses: | ||
| Employee compensation | 2,578,947 | 1,636,095 |
| Selling and marketing expenses | 1,589,027 | 202,896 |
| General and administrative | 460,902 | 261,817 |
| Commissions paid to franchisees | 7,602,155 | 2,284,120 |
| Franchisee training and other services | 218,292 | 84,311 |
| Total operating expenses | 12,449,323 | 4,469,239 |
| Income from operations | 2,732,306 | 264,795 |
| Interest income | 391 | 2,780 |
| Net income | $2,732,697 | $267,575 |
Lendio is a very profitable business for the franchisor with retained earnings of $2.7 million in 2021. Compared to 0.2$ million in 2020, they saw an increase of over 1000%. While this might be a good indication of high growth as a company overall, this can also be indicative of the fact that Lendio’s financials have been manipulated at some point in the process. We recommend talking to Lendio about their business model and revenue generation practices before entering into business with them!
How many Lendio units have opened and closed?
System-wide Business Summary For years 2019 to 2021
| Business type | Year | Business at the Start of the Year | Business at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 47 | 56 | +9 |
| 2020 | 56 | 67 | +11 | |
| 2021 | 67 | 121 | +54 | |
| Company-Owned | 2019 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | |
| 2021 | 0 | 0 | 0 | |
| Total Businesses | 2019 | 47 | 56 | +9 |
| 2020 | 56 | 67 | +11 | |
| 2021 | 67 | 121 | +54 |
Over the last three years, the company has been expanding rapidly. It had 47 locations at the start of 2019. As of the end of 2021, it was at 121. That is a 150% increase. Lendio franchises have been opening at an average rate of around 25 locations per year in that period.
Conclusion
The credit industry in America is one of the biggest ones and Lendio offers a piece of that industry. Lendio had 1000% revenue growth in a year and does not provide any information on how much franchises make so we recommend speaking to existing owners about their revenue split to determine the viability of these franchises.
While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the Professional Business Services Industry.
