The Merchant Cash Advance industry since 2008 has been winning, winning, winning, winning. Court case after court case they're saying, "Well, the small businesses just signed a bad deal, and if you sign a bad deal, I mean, we're sorry, but too bad." What happened in 2022 is the federal courts started stepping in and saying, no, it's not okay to charge 80% interest. No, it's not okay to charge $5,000 penalty fees for missing one ACH and what they really said is that in some cases these are criminal usury loans.

The problem is that for you to be able to address and utilize these new rules and these new case laws, you really must be great litigators. Every single time, these funders are well funded, and they are used to suing and pressuring and quite literally financially crippling these small businesses. Last week, we got a judge in New York to agree with us and to say that these lenders need to be restrained, and what the judge did is he entered a temporary restraining order for one of our clients. It doesn't mean it's permanent, we still could go and have a hearing on it, but for this client, it's going to bring immediate relief. Our client's small business was medium sized which was made up of about 33 employees. Our client is a construction company who does work for city governments.

What happened is, when they had some problems, and they were falling behind, they couldn't keep up on these massive payments. At 81% interest the MCA funders were on top of them. So, they notified the funder on February 3, that they were having financial difficulties and were having a hard time and needed to rethink and restructure some of their payments and of course, what did the funders do? They sued him days later. Then what they did is they submitted liens, they locked up payments from the city governments that were supposed to be coming down to pay the payroll for their 33 employees.

So now, he couldn't get paid from any of his city government contracts. Suddenly, he had employees that weren't going to get their paychecks. They sent the same letter called a lien to the subcontractors telling them that our client is in default, and that he owes all this money. It got them to say, well, look, we don't know if we're going to get paid so we're not going to show up on the job site.

What really happened there? What really happened is this merchant cash advance funder was going to destroy and crucify this business. Now, I'm sorry, but when our client signed this merchant cash advance to receive money, there was no language in there that said that "If you don't pay us exactly as we say, and exactly when we need it, then it doesn't matter if your company's having financial problems. It doesn't matter if this contract is allegedly based off of your account receivable, if you do not pay us exactly how we allegedly envisioned, then we will destroy your business."

We have been successful with working with factoring companies, banks, payment processors, and educating them on why the Merchant Cash Advance Agreements need to be significantly analyzed and given a legal second look before they are enforceable at first glance. We were able to get a judge to issue an injunction, a temporary injunction, but that injunction says that this funding company cannot enforce any of these agreements. There's going to be a hearing on making a permanent injunction and again, our argument is simple. Yes, my client signed this agreement. Yes, this agreement has a high interest rate. Yes, they put it as a personal guarantee. But nowhere in this agreement did it say that part of the funders' tools to be able to get their money was to be the one that physically destroys their business.

Further, in the case cited above, we're going to be having a hearing before the judge on March 25th and one of the things I've instructed my attorney who's going to be making the presentation is, I want him to make it clear to the court. This is New York City, there's a long history of the mafia. They used to pressure the small businesses for protection money. They used to do loan sharking, amongst other things. These funders are allegedly acting like the modern mafia (metaphor) holding small businesses in a financial prison. It was so bad over the years that they created this criminal usury law, which makes it a crime to basically pressure businesses this way in charge of interest over 25%. In my view, when I look at this case, I look at these funders and what they did in this case, how they handled this case, in the sense of how they put pressure to destroy my client, a financial bomb, they threw down on our client's middle-sized business, allegedly.

So, GREAT victory last week and one of the first that I've seen in New York. We are very excited to be in the forefront of attacking these funding companies and we are extremely excited for our clients. Now we can immediately get these funds released and this is just the first step of what I know is going to be a further journey down the road.