Archive for 2020

Immigrating From Cuba With “Nothing in my pockets,” to a CEO Funding $12 Million a Month

“Work hard, don’t ask questions, and good things will happen to you,” Frank Ebanks described his keys to success in the MCA world. “Being Positive, working hard, and keeping my eyes open: If I hadn’t been looking for opportunities at 2 am in the morning on Craigslist, I would have never known about this industry, but it’s huge, it’s such a big industry.”

Ebanks started what would become Spartan Capital shortly after seeing an ad calling for startup investors in an industry Ebanks had never heard of, called Merchant Cash Advance.

It was around 2016. Ebanks was up late in the NYU university library, putting himself through an MBA while working as a reactor operator at the Indian Point nuclear power plant in Westchester.

Despite the job security Ebanks enjoyed, he said he wasn’t happy with his career, wasn’t getting the satisfaction he wanted. He had already made it a long way— starting before the millennium as a Cuban immigrant, immigrating to the Dominican Republic in 1998 and then Florida in 2002 with empty pockets. Shortly after arriving, Ebanks enlisted.

“I spent some time in the army; I wanted to put in some time,” Ebanks said. “I said: ‘I’m a new immigrant, what’s the best thing that I could do to reward these opportunities?’ To serve in the army, give the country a couple years, and payback in advance for this opportunity that I knew I was going to have.”

Ebanks said he learned early on to take every opportunity seriously. He served for two years and then became an engineer and contractor for the army, working on the Patriot Missile defense system. He went through college at NJIT, graduating in 2009, and following in his father’s footsteps to become an electrical engineer.

After working with South Jerseys PSE&G, Ebanks took the opportunity to work full time shifts at the the nuclear power plant, and by 2016 he was pursuing an MBA and looking for ways to grow what he called “my empire.” Used to investing in small businesses already, discovering MCA fit right within his world.

“I’ve always been active, throughout my professional career I had businesses in real estate, I owned several businesses such as laundromats, a lot of retail cell phone stores and things like that,” Ebanks said. “So at one or two am in the morning, I’m working on how to build my empire. I was on Craigslist looking for opportunities, seeing what’s out there, and somebody wanted an investment, to partner up and start a company in a new industry.”

He took a meeting and learned a ton. Although he did not end up going into business with that person, he was hooked on the concept.

“I looked at that ad, and $10,000 later, we had a company,” Ebanks said.

He learned what he needed and ended up opening his own MCA business shortly after in New Jersey, finding he loved setting up syndicated MCA deals.

“I did some research, opened an office in New Jersey, secured a manager to run the operation, and we started brokering deals and learning about syndication.”

He worked with SFS Capital, now called Kapitus. He fell in love with the immediate gratification feedback of making deals, seeing returns on account receivables, and watching renewals come in. The business grew, but things were not always a straight climb to success.

“There was a point where things were not going well and I had to start a new company, find new parters and investors with a funding direct-only focus, and moved into my basement- my wife was unhappy with that. I started hiring people, processors, underwriters, and ISO managers in my basement,” Ebanks said. “At one point, she said, ‘Okay, this is enough. Ten strangers are coming into my house every day, you’ve got to get an office,’ so we secured an office in New York. And that’s when things took off in 2017.”

At that point, Ebanks had shifted his business model from securing deals to funding them all his own, using capital he raised. Ebanks said that being a broker partnered with Kapitus was great, but he wanted to grow and run his business entirely. The best way to do that was through ISO management, Ebanks said. Ebanks let the direct sales team phase out and he hired ISO managers, learning the ISO business as he went.

“So fast forward now: We have over five ISO managers, and we’re funding about $12 million a month,” Ebanks said. “It’s been a phenomenal journey and the most rewarding thing I’ve ever done in my life; I’m not shy to share how exciting every day is to me, and how other than my family and my kids and God, this is the most important thing my life.”

For brokers looking to get started in the industry, Ebanks has this advice to share: Don’t settle.

“Don’t settle, look for growth, and invest your money,” Ebanks said. “I always invested everything I could, 95%, every penny on the business. It matters especially at the beginning, the more you invest, don’t let it sit.”

That investment should go toward your business, your staff, and hiring. Ebanks said the more you invest, the bigger the bag, the more your firm would grow, and your employees will grow with you. Helping employees will mean they will eventually leave, but in Ebanks’ experience treating employees right creates partners.

“Some of them now are partners, and the employee-employer relationship is always more partnership,” Ebanks said. “Some of them own their own companies now, and we help each other out. If they have a big deal, they say: ‘Frank do you want to take $50,000 out of this deal?’ I say yea I trust you. I’ve known you for years.”

Now that he’s on track to grow with recurring customers, seeing some merchants come back to renew twenty times since 2016, Ebanks sees a possible bright future for Spartan Capital: becoming a chartered online bank.

“It is an alternative lending space but to offer the best products to people,” Ebanks said. “I think at the end of the day, and we need all the resources we can get, the next chapter is to apply and secure an online bank charter, it’s the future of the fintech industry.

“Why do people like doing business with us versus a bank? Some of them can do business with banks, but they choose to use us because they have direct access to us after 6 pm, they could call us Saturday, they can call us on a Sunday,” Ebanks said. “A great relationship that they can never get from a bank. I want to bring what we do in MCA to the banking industry to serve people that want banking products, but I want to give them that MCA experience.”

State That Wooed Yellowstone Capital to Its Shores Has Changed Its Mind

The Attorney General of the State of New Jersey filed a lawsuit against Yellowstone Capital, LLC and several affiliated parties on Tuesday.

The 55-page complaint trots out a long list of allegations but appears to hone in on the company’s actions or alleged lack of action on the reconciliation provision of its merchant cash advance agreements. The AG alleges that the manner in which the defendants conducted themselves should subject the agreements to the state’s lending laws.

Notably, the State says these unlawful acts began in July 2015, months before the State lured Yellowstone to relocate its headquarters there from New York.

In September 2015, for example, the New Jersey Economic Development Authority approved Yellowstone for up to $3.3 million in Grow New Jersey tax credits. When Yellowstone officially moved to Jersey City in 2016, the city’s mayor even made a personal appearance at the office to welcome them.

Now that Covid-19 is ravaging the state’s economy, the political opinion has seemingly changed.

“We are taking action today to protect our State’s small businesses and small business owners from predatory practices in the market for merchant cash advances,” said Attorney General Gurbir Grewal. “Local businesses are struggling due to the COVID-19 pandemic, especially since many were unable to take advantage of the limited relief made available by the federal government through the Paycheck Protection Program. We will not tolerate – now or ever – efforts to take advantage of them through predatory lending and collection practices.”

In 2015, however, New Jersey officials assessed that Yellowstone would have a “net benefit to the State of $23.3 million over [a] 20 year period” and that it was economically important to attract their business operation. Yellowstone was at that time considering a move to White Plains, NY from the company’s original Manhattan offices, State officials argued, so they really had to offer the tax credits for them to come to New Jersey instead.

“Yellowstone is comprised of a team with years of industry experience,” says a 2015 project summary prepared by NJ Economic Development Authority officers Diane Ubinger and Mark Chierici. “As both a direct source of funding and as part of the country’s largest Independent Sales Organization network (‘ISO’) it has numerous in-house funders who concentrate on specific industries/businesses, while also having numerous funding partners within the MCA industry who fund its ‘outside-the-box’ transactions.”

But later in 2019, the deal changed when Yellowstone’s capital investment requirement was not met, the Authority’s communications director told deBanked. As a result the company ended up not receiving the tax credits.

“The NJEDA is committed to ensuring that businesses approved for tax incentives are compliant with all program requirements and to making sure that companies that do not meet their commitments to the taxpayers of New Jersey do not benefit from NJEDA-administered programs.”

Additional allegations in today’s complaint were made regarding Yellowstone’s historical use of confessions of judgment, a recovery tool that was largely eradicated by the passing of a law in New York in 2019.

The AG’s case was filed in Hudson County in the Superior Court.

Yellowstone Capital offered no comment to this story.