‘Shark Tank’ Alum Secures Funds Through Shadowy Lenders to Cover Tariffs
Joshua Esnard, founder of The Cut Buddy, is navigating the pitfalls of securing funding amid rising tariff costs. The North Carolina-based entrepreneur has faced an influx of aggressive offers from various lenders, offering instant cash to help manage unexpected tariff payments. With amounts ranging from $350,000 to nearly $1 million, these pitches frequently disrupt his workday.
Desperate Times for Small Business Owners
Esnard is not alone in his fight. The urgency for financial support among small business owners surged in 2022, driven by high tariffs on imported goods. President Trump’s trade policies significantly increased costs, impacting importers reliant on products from countries like China, France, and Vietnam.
As costs soared, business owners often resorted to merchant cash advances (MCAs). These quick but costly loans provide immediate cash flow but can lead to significant debt burdens. Esnard found himself among many facing the unpredictability of such financing.
The Rise of Merchant Cash Advances
MCA lenders operate outside traditional banking regulations. This lack of oversight allows them to impose exorbitant fees. According to industry experts, the average annual cost of an MCA can reach as high as 350%. With the additional financial pressure from tariffs, many businesses like Esnard’s are caught in a cycle of debt, needing to borrow more to pay off previous loans.
- Tariff Impact: Esnard’s tariff bills exceeded $800,000 in a single year.
- Debt Accumulation: To cover these expenses, he secured three MCAs totaling $950,000, resulting in a total debt of over $1.2 million.
The Cut Buddy’s Journey
Esnard’s entrepreneurial roots trace back to a DIY haircut in his youth. His innovative spirit led to the creation of a hair trimming guide called The Cut Buddy, which has since grown into a profitable business. Now, the company generates approximately $6 million in annual revenue.
However, growth has not been without its challenges. The recent tariffs significantly impacted product prices and import duties. For instance, one shipment resulted in a duty of $4,636 for items valued at $3,040. Such financial pressures led Esnard to make difficult decisions, including halting charitable donations and skipping his own paycheck.
Seeking Solutions and a New Path Forward
After years of managing predatory loans, Esnard sought a new solution through the Business Consortium Fund, a nonprofit organization aimed at supporting underfunded businesses. He requested refinancing to transform his high-interest MCA debt into a more manageable traditional loan.
His appeal was met positively. The Fund agreed to assist, helping Esnard transition to a five-year loan with sustainable terms. While relieved to escape the cycle of expensive advances, he understands that the journey to financial stability remains ongoing.
The Broader Implications
The challenges faced by The Cut Buddy mirror a larger trend among small businesses in the U.S. Many entrepreneurs struggle to access traditional financing, often pushed toward risky alternatives like MCAs. As regulatory measures evolve in response to the predatory practices within this industry, businesses must remain vigilant and informed about their borrowing options.
As Esnard continues to innovate and lead The Cut Buddy, the story serves as a cautionary tale of navigating business finance in a challenging economic landscape.
