Archive for 2020
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.
Yellowstone Capital offered no comment to this story.
Update: 12/9/20 This story has been updated to reflect the current status of the tax credits as provided by NJ EDA.
On December 17, 2018, the owner of a mexican restaurant in Springfield, Illinois, is alleged to have submitted altered bank statements to National Funding, Inc as part of a loan application to obtain $35,000. What he got in return was an indictment by a federal grand jury.
On Dec 2, 2020, the US District Court for the Central District of Illinois unveiled a seven-count indictment against Omar Hernandez-Lopez. Hernandez-Lopez is the owner of El Tapatio De Jalisco Inc DBA La Fiesta Grande.
Prosecutors say Hernandez-Lopez sent doctored PNC bank statements to two lenders, National Funding and Loan Depot in multiple instances. The actual charge is that the defendant knowingly made a false statement for the purpose of influencing the action of a lender in connection with a loan application.
Apparently, no falsehood is too small. For example, in one count the defendant is alleged to have changed a monthly ending bank statement balance of negative $72.91 to positive $131.90, a difference of $204.81. He is also said to have obscured the amount incurred in overdraft fees.
The penalty if found guilty on any one count? Up to 30 years in prison.
Prosecutors cite Title 18, United States Code,§ 1014.
Defendant is innocent until proven guilty. A copy of the indictment can be viewed here.
After 38 years, Guillermo Hernandez has seen the boom and busts of the Mexican financial markets, weathering seven recessions in all, he said. But until 2020, he had never led a company through a pandemic.
Aspria, Hernandez’s online lending firm, had planned on completing a Series A from international investor Oikocredit, but the deal went into the icebox as the cases came.
“In the beginning of the year, things were doing very well in Mexico, the whole economy was booming,” Hernandez said. “Out of nowhere, we got hit by the pandemic. And the transaction that we were supposed to be closing in March 2020, our investor said, ‘you guys are fantastic, but there are too many unknowns.'”
But due to Aspiria’s resilience and the fact that they went into 2020 with a rock-solid business, Hernandez said Oikocredit decided to complete the investment deal. Aspiria was growing and profitable, and though it was unclear if the markets were going to fall apart, Hernandez said he and his team put the nose to the grindstone and worked through it.
Oikocredit is a worldwide cooperative that provides loans and investments to promote financial inclusion while empowering people by improving livelihoods. That vision is what Aspiria aims to accomplish as an SME lender, Hernandez said, helping businesses access funds to grow.
The Mexican financial space has ample room for growth, and Hernandez said Aspiria is one of the first alternative business lending firms to capture the market.
Hernandez said the banking world in Mexico is twenty years or more behind the US, and he founded Aspiria to bring some change to the financing space.
“The whole financial services industry, I mean it’s light-years behind the US,” Hernandez said. “I saw that the way that people would do the underwriting, the way that people provided financing for small businesses was just so outdated; it was more of an old school market here. I decided there was this huge opportunity for the market.”
For example, Mexico has a third of the US population, but only 30 banks to the 7,000-10,000 the US has. That population is also a younger demographic than up north. In Mexico, the average age is 27 (It’s 38 in the US); Hernandez said: the Average Mexican is trying to establish themselves and reach the middle class, young, educated, and ready to start a business.
Hernandez has been working in finance all his life, starting in Mexico as a banker and consultant for new financial companies before leaving to get his MBA on an HSBC scholarship in Manchester, England. He worked for a time in financial services there before joining a payment startup in the US, where he found his love of startup tech culture.
“It was my first exposure to technology, and I was completely amazed. I fell in love with it,” Hernandez said. “At that moment, I was actually thinking about changing careers. I was completely fed up with financial services because it’s boring sometimes. I thought it was not sexy anymore.”
Co-founding Aspiria, Hernandez went on to become the major funder in the space. He said there is so much demand for capital in a standard year that his firm can see 100% year-over-year growth. Even in a pandemic, his firm received a confident investment that will go directly toward building the shop, scaling up funding, hiring, and aiming toward a firm that will one day put it on par with the rest of North America’s leading alternative finance firms.
Aspiria (www.aspiria.mx), a digital lender targeting underbanked small and medium enterprises (SMEs) in Mexico, has completed an important Series A funding round with participation from social impact investor and worldwide cooperative, Oikocredit.
The Series A closing also saw follow-on investments from Aspiria’s current shareholders. The proceeds from the capital round will strengthen Aspiria’s financial capability to support Mexican SMEs.
With its investment in Aspiria, Oikocredit continues its commitment to support SMEs in Latin America, as Oikocredit sees SMEs as playing an important role in areas such as job creation.
Aspiria began operations in 2015 and has lent thousands of loans throughout Mexico. The institution has leveraged digital technologies, data analytics and high-quality service to support the financial needs of Mexican SMEs.
Guillermo Hernandez, CEO and cofounder of Aspiria, commented: “At Aspiria we are very excited to have Oikocredit onboard. SMEs have faced big challenges due to the pandemic and are in need of great financial services. Oikocredit’s investment is an acknowledgement of the tremendous potential of the Mexican SME sector. We look forward to continuing to serve a multitude of SMEs and helping create thousands of jobs in the country”.
Rodrigo Villalta, Equity Officer at Oikocredit, said: “At Oikocredit, we are proud to become shareholders of an institution whose mission is to provide financial support to SMEs that have been typically excluded from the formal financial system”.
“Mexican SMEs are key contributors to employment generation and economic development. We are happy that we can contribute towards building stronger social impact in the country by supporting access to the formal financial system for Mexican SMEs.”
Aspiria works to increase access to capital to small businesses. Through our platform and the use of statistical credit origination models, we make it fast and simple for the small business owners who have been shunned by the traditional banking system, to obtain financing to continue growing their business.
For more information see: www.aspiria.mx
Social impact investor and worldwide cooperative Oikocredit has 45 years of experience funding organisations active in financial inclusion, agriculture and renewable energy.
Oikocredit’s loans, equity investments and capacity building aim to enable people on low incomes in Africa, Asia and Latin America to improve their living standards sustainably. Oikocredit finances close to 689 partners, with total outstanding capital of € 856 million (September 2020).
For more information see: http://www.oikocredit.coop
Note for editors
For more information or to request an interview, please contact Leyda Mar Blanco, Marketing Manager, Aspiria, firstname.lastname@example.org
Libertad 1966, Col Americana, Americana, 44160 Guadalajara, Jal., Mexico
The SBA’s time has run out: on Tuesday night, the organization released the loan data for all Paycheck Protection Program (PPP) recipients. The name, address, and how much each recipient received was posted in a series of excel spreadsheets in compliance with a D.C. District Court order, decided November 24.
The results do not inspire confidence. Despite knowing this data would be scrutinized by the public, records show that nearly $10 million went to businesses for which the business name field was not entered correctly. Some of these were blank while others contained phone numbers or random dates.
Is it fraud? Maybe, maybe not. It certainly suggests, however, that the official books on $525 billion in individual PPP loans aren’t exactly up to snuff.
The legal struggle to release the data began with filing a Freedom of Information Act (FOIA) in May by a coalition of news companies, including the New York Times, representatives for the Wall Street Journal, ProPublica, and 11 other newsrooms. They hoped to uncover where billions of CARES Act loans went but received privacy concern pushback from the SBA.
In June, the SBA released limited info on the top bracket of loans, from $150,000 upward. United States District Court Judge James Boasberg ruled that there was no reason not to release the information after the SBA refused to open the files up on the bottom 4 million loans at the beginning of November. The SBA pushed for a stay of the order, which was shot down by Boasberg, and finally, the SBA released the data.
As of early November, the agency had processed and approved more than 5.2 million individual PPP loans, along with an additional $192 billion in EIDL loans. PPP funds had the unique distinction of being forgivable so long as they were used for expenses like payroll.
A PPP & EIDL search tool is available on the Small Business Forum where anyone can query the released data.
A court order recently forced the SBA to reveal precise details of every single PPP and EIDL borrower regardless of loan size and regardless of privacy concerns.
The SBA dumped all the data late on Tuesday night through a series of downloadable .csv files.
However, small-business-forum.net has made a web-friendly search tool for the PPP loans (not the EIDL), which contains 5 million records. The loan amounts are precise. This latest cache of data is different from the previous reveal in that the loan amounts are exact. There is no approximating here.
The mass disclosure was viewed as controversial because PPP loan amounts were directly correlated with monthly payroll figures so one could potentially deduce the salary of a self-employed business owner with no employees by knowing just their PPP loan amount.
In any case, all of the data has been made public. The easiest way to search the database is at https://www.small-business-forum.net/pppchecker.php
Enova International announced the appointment of James J Lee to the position of Chief Accounting Officer. The new role went into effect on November 23rd.
Lee was previously the Controller of Life & Health of Kemper Corporation.