Merchant cash advances (MCAs) often target small businesses teetering on the edge, desperate for a financial lifeline. These businesses might be struggling with cash flow or looking to expand but lack access to traditional financing. Yet, even larger companies sometimes fall prey to the seductive allure of quick cash. Then, the high interest rates and fees can become a terrible burden.
MCAs payable at ‘409% interest’ rate
MyPillow CEO Mike Lindell has found himself in this situation. MyPillow and several other businesses tied to Lindell, is suing Cobalt Funding Solutions and Streamline Advance, alleging deceptive practices. These companies provided MyPillow with a $1.6 million loan under a merchant cash advance agreement. The terms were severe—50 daily payments exceeding $45,000, totaling $2.3 million — a staggering 409% interest rate. This along with a hefty $125,000 origination fee.
MyPillow was once a thriving company that sold pillows directly to customers and through major chains like Walmart. But Lindell’s high-profile and controversial political activities in recent years have caused revenue to tank. The company has defaulted on several loans, which could explain why Lindell turned to MCAs instead of traditional ways of raising cash.
The fight for fair financial practices
This case underscores a broader issue: the urgent need for fair financial practices. Small businesses, the backbone of our economy, deserve better than to be ensnared by deceptive practices. It’s time for a financial system that supports growth, not exploitation.