“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.”
What do small business finance companies think about the reality of a Biden White House? Will there be dramatic regulatory changes, massive new government stimulus, or significant differences in coronavirus policy?
“Not likely,” according to the head of two funders we spoke with. The CEOs of Greenwich Capital Management and Spartan Capital Group seemed to agree that overall, not much would change.
“We don’t expect any major changes to the industry to MCA,” Frank Ebanks, Spartan Capital owner, said. “I don’t think it would be any different than what we saw and experienced under Trump. Some states, some federal organizations attempted to regulate the industry, that’s already on the way, and that might continue: I don’t see it picking up any intensity.”
Ebanks’ firm has been around for four years, funding deals of up to $2 million. In that time, Ebanks has seen states like New York and California pass lending regulation and renewed activity at the CFPB, but never a fed-wide push to take on small business lending.
Nathan Abadi of Greenwich Capital Management, believes there might be short term benefits under Biden.
“In the short term, I think it’s going to be pretty good for people in our industry because under a Biden administration, we’ll see more bailouts go to SMBs than we would in a republican administration,” Abadi said. “If small businesses get bailed out, that means they can make their payments, and everyone is winning.”
He was less optimistic in the area of regulation, however.
“It’s necessary for our industry to have some vetting process and some regulation, as you saw happen with Par recently,” Abadi said. “All these other companies are taking in private investments from multiple investors, not necessarily accredited, and the money kind of goes into a black hole.”
Abadi further said that he thought while regulation is good for those who play by the rules, Democrats can go overboard.
Ebanks, meanwhile, thinks there is saftety in being a B2B business.
“Transactions between two individual companies are hard to regulate, especially when it comes to contracts,” Ebanks said. “That will stand and be around for a long time regardless of the government or who the president is.”
Ebanks continued to point out that an incoming administration would avoid changing anything that might hurt the economy now more than ever.
“I think that the President-Elect will put teams together that will attack the coronavirus situation aggressively and will neutralize it rather than try to live with it,” Ebanks said. “It’ll be tough for a month or two. And after that, it will be sort of back to normal, with just heavy aggressive localized actions.”
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