Small businesses targeted by unauthorized withdrawals

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The last thing struggling small business owners need right now is to have money illegally taken out of their pockets. According to a complaint filed today by the FTC, that’s exactly what a company that offered small business financing did to its customers.

The FTC alleges that Yellowstone Capital, LLC, Fundry, LLC and their executives continued to withdraw payments from small business bank accounts even after they had already paid off what they owed in full. The defendants in that case offered financing products called “Merchant Cash Advances” (“MCA”) to small businesses. MCAs give business owners quick access to money and are often marketed to business owners who are not eligible for bank loans or other traditional forms of financing.

Defendants’ MCAs are supposed to work like this: The MCA provider agrees to give a certain amount of money to a company in exchange for a higher amount in return. The business will pay this higher amount over a period of several months through daily automatic withdrawals from the business bank account. But the FTC says Yellowstone continued to take those daily payments even after companies paid off fully.

The FTC alleges that the company also misled customers about other important details of its cash advance products. For example, Yellowstone falsely promised that its MCAs required “no guarantees” and “no personal guarantees” when they did. The FTC also says the company gave business owners significantly less money than promised, withholding significant fees from that promised amount.

This case reminds us that, even during the pandemic, there are companies ready to deceive and illegally take money from struggling small businesses. If you are a business owner looking for financing, look at this advice to help you stay away from this driving.

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