APRIL 2025 INDUSTRY NEWS AND TRENDS
Predatory merchant cash advances result in $1B settlement
As small businesses face increased economic volatility, it’s more important than ever to be aware of predatory financing risks. A relatively recent case shows how prevalent this issue is. In January, the New York Attorney General announced a $1 billion settlement with merchant cash advance company Yellowstone Capital. The company had been charging companies interest rates as high as 820% per year.
In addition to the settlement, the company had to pay $16.1 million to affected New York businesses and cancel more than $36 million in debt. The company’s predatory activities affected 18,000 businesses in the U.S.
Merchant cash advance company allegedly amounted to a “Ponzi scheme”
The owner of a company purporting to be a merchant cash advance (MCA) business has been charged with wire fraud. The company was supposed to loan money to small businesses at a high interest rate in exchange for a percentage of the businesses’ credit card sales or bank deposits.
The company owner allegedly solicited investment to fund the company’s MCAs, but used those funds—more than $40 million—to pay off early investors and finance his own lifestyle.
Recent policy brief reveals small business financing challenges
The U.S. Department of the Treasury (Treasury) released a policy brief on financing for small businesses. According to the findings, traditional, community, and mission-driven lenders have made a positive impact on small business financing options, but they have not filled all the gaps. Small business owners who wish to explore alternative financing have trouble finding the information they need to understand and compare their financing options.
