Money Rehab with Nicole Lapin - A Loan Shark Offered Aurora James $500,000 To Keep Quiet. Her Silence Cannot Be Bought.

Episode Date: July 10, 2023

Aurora James (the brilliant entrepreneur behind Brother Vellies, the Fifteen Percent Pledge, Friends and Family Collective) was preyed on by a loan shark. When she fought back, he offered to reduce her debt by $500,000 to sign a NDA. She didn't sign. Instead, she's used her story to protect female entrepreneurs from having to suffer the same challenges she did. Today, Aurora tells Nicole that $500,000 story. Find Aurora's new memoir here: https://www.penguinrandomhouse.com/books/672115/wildflower-by-aurora-james/

One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that

I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details.

I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. By now, we are all too familiar with the consequences of inflation and supply chain issues. Prices are high. And that has really hurt people who live within tight budgets, from the single parent trying to put food on the table for their kids, to the business owner struggling to buy materials they need to make their products. We know it has been hard. And there is another, more insidious consequence of rising prices. Loan sharks are working harder than ever to take advantage of people who are struggling under the burden of rising prices. With rising costs, more people are living paycheck to

paycheck, which means they might need a quick influx of cash in order to pay their rent or the credit card bill at the beginning of the month. That's where the loan shark comes in. Loan sharks offer a quick cash fix that can cost a borrower up to 400% of the money they borrowed. In the UK, a new survey showed that 3 million people borrowed from an unlicensed or unauthorized money lender in the last three years alone. Today, I'm talking to an entrepreneur who was preyed on by a loan shark and fought back. That business owner is Aurora James. And by the way, Aurora is a total badass. She has done a ton of incredible things in her career. A through line of her projects is empowering people of color, whether it's through protecting traditional African design

practices through her fashion label Brother Valleys or fighting for economic opportunities through her organization 15% Pledge. And she just announced Friends and Family Collective, a fund that will focus on founders of Black-owned businesses. She talks about her experience with the loan shark in her new memoir, Wildflower. And I have to say, I think about Aurora. She is such a changemaker, and she has completely dedicated her life and career to empowering people of color. And then I think about the type of person

who would want to destroy that to make a quick buck. It really makes my heart sick. But despite the challenges, Aurora continues to be an inspiration. To anyone considering becoming one of the millions of people who borrowed money from an unauthorized lender, Aurora's story is one you need to hear. And even if that isn't you, I'm sure you have a money thing. You know, the one thing you're too embarrassed to talk about or ask about. We all have that money thing. And Aurora is living proof of what I've always said on this show. Your silence doesn't help you. In fact, it only hurts

you. Here's Aurora's story. Aurora James, welcome to Money Rehab. Hi, Nicole. I'm so happy to be here today. I'd love to start with Brother Vellies. You started this fashion label in 2013 with the goal of keeping traditional African design practices and techniques alive. I read you launched with $3,500 in a flea market. Am I getting that right? Yeah, I know. It seems crazy. I was traveling across Africa and discovered what actually is the very original desert boot. And I didn't realize that that was an African shoe. And I worked with a group of artisans there who were really in need of opportunity. American donated clothing have actually killed 80 percent of the manufacturing industry in Africa, which I had no idea about.

I was someone who grew up just with the whole idea of, okay, donate clothes to people in need. And I didn't realize that it was actually like killing the African economy. And so I started working with a bunch of artisans and I took my entire life savings, which was $3,500 at that time and created a collection of shoes and brought it back to the Hester street fair in the Lower East Side of Manhattan and launched a booth for $70. And that was how I inadvertently launched my fashion brand. But the leap of faith that you took at that moment wasn't like a graceful grand jeté into the promised land, right? Fast forward, your brand has become an enormous success, spoiler alert, but this wasn't

without challenges. So part of this journey I find so interesting that you talk about is battling a predatory loan shark. And this is a systemic problem, as you know, in the financial world that just makes my blood boil. So let's start at the beginning of that saga. I know sadly that you connected with this loan shark at the recommendation of a member of the Council of Fashion Designers of America. What was the story there? Yeah. So it's interesting, right? Because usually we don't know that loan sharks are loan sharks. And for me, this was someone who was an assigned mentor to me from an organization that had done so much to support me that like, and now the vice president of, and I think it was really well-intentioned. And listen, like for some people, I think that they probably have reasonable working relationships. For me, that was not how the deal was structured. And because I trusted this person,

it was kind of the one and only contract that I never sent to my lawyer. And it's fascinating because we tell these stories about entrepreneurship, right? And they say like, okay, you raise money from friends and family, you bootstrap. It's like, what actually does this mean? And what happens if your friends and family don't have $50,000 to loan you, right? I didn't know anyone that had money at that time. And so when I had received a purchase order from a big retailer that hadn't given me a deposit on that purchase order, right? They were trying to buy $100,000 worth of product. I needed 50,000 or so to make it. I didn't have that money because the

business was growing so quickly, right? That there were all these purchase orders that I needed to fill. Where do you turn to in that situation? I had just gotten a social security number, so I didn't have a credit history, right? Which is a lot of the case for immigrants in this country. I didn't have any collateral that I could put up. My options are really limited. And he was someone who was there and who I trusted. And then the terms were as such that it basically, you know, it cost me seven figures to get out of, which is insane. Oh my God. And it's a great point. I mean, loan sharks aren't walking around in like a shark outfit, right? Like they don't have a sign on them

that they're sketchy. When did you feel like there was something wrong? Oh my God. Honestly, like a week after I signed it, because it also took him so long to actually send the wire. And then that put us in a worse position that it was almost impossible to climb out of. And what's so fascinating about it is when you look at a lot of these kind of factoring relationships and some of these predatory lenders, like it's not that much different than crop sharing. And I wasn't that familiar with the concept of crop sharing, right? Even though it's a huge part of the Black American experience. But it's this idea that the lender will make you work yourself into debt so much that they actually just end up acquiring your company. And interestingly, I had seen him do that with a bunch

of fashion brands. And I think there's so much shame, especially also in fashion. And listen, like I was launching my company in like girl boss era, right? It was like, everyone was like breaking glass ceilings. They were like pregnant on the cover of a business magazine. It was like, you were supposed to be doing all the things. And that was not me. I mean, I was having tremendous success in terms of, you know, people loving the shoes and everyone was wearing them. There were a ton of celebrities and there

was a ton of press and all that jazz. But on the financial back end of it, the way that that deal was structured made it as such that like I couldn't pay my rent a lot of months. The glamour on the outside or on the social media was one thing, but I really admire how you talk about the real deal in your memoir. You talk about how you were puking in the alleyway in the garment district before the meeting with this loan shark. I mean, I really appreciate how honest you are about your experiences in this awful story because I think it will help people as they're looking at financial challenges that come with girl bossing and it comes with a lot of shame. So people tend to, you know, keep all of that to themselves. So I know it means a lot to people to hear you really

open up about that. Right. Thanks. I mean, it also costs me a lot of money to not sign that, that NDA, but I feel like it was worth it, you know, to be able to speak out about this because things like that continue on because they stay in the dark, right? And we, especially as women, need to do as much as we can to kind of shine light on the realities of these situations. And then also when we become more successful, continue to invest in each other and pay forward what we've learned, right? Like the most violent part of that experience would be if he continues to be able to perpetuate that onto other female entrepreneurs. When you said it cost you a lot to not sign an NDA, let's unpack that for a second.

So it sounds like as you were getting out of this deal, an NDA was on the table. Yes, an NDA was on the table. He said he would reduce the amount that was owed by $500,000 if I signed an NDA. That's what his attorney said to my attorney. And you felt like your story and your voice was worth more than that, I assume. I've never uttered a faster no in my life, Nicole, because I know that other women's businesses and other women's financial liberation is worth more than that. And if I'm now in a position where I can afford to pay that, that is the win for me. That

is the success metric that I live my life by. And so how did the whole story end? You didn't sign an NDA, but what happened? I didn't sign an NDA. I paid this man over a million dollars and now we're here and it, and it sucks. You know what I mean? It sucked. But I think for me, I'm just happy that I got out of it with my business intact, with the ability to tell the story and with the ability to talk to other people about it and say, like, I get it, right? Like I'm someone who fell in love with shoes. I'm someone who fell in love with making women feel empowered with an object that was historically used to like keep them from running away, right? Like heels have a complicated history as well. And I'm not someone who

necessarily set out to master like a PNL and really crush, you know, their EBITDA. And I think that means that I have to be aware of my blind spots and I have to tune into those. And if I can't, then I need to make sure that I'm structuring my business in a way where I'm making space for other people to be able to do that for me. Because I think in today's society, like being the entrepreneur is the major. And oftentimes what you're actually doing is the minor, right? For sure. I mean, you mentioned something that I think is important to double click on for aspiring

consumer product entrepreneurs, which is PO financing. So this purchase order idea is so crazy to me because it's like high class problems. You get an order, but you can't pay to fulfill that order. Can you talk us through how you discovered this issue? Yeah. So the majority of my retailers, when I first started Brother Bellies would give me a deposit on the purchase orders, right? I would explain to them, listen, I'm working with tiny workshops all across Africa. Like they need money in advance so they can even turn the lights on and start working and all of that jazz. So they really

kind of understood that and would give me deposits. And then I ended up working with another retailer who placed a big order, who was like, we just don't do that. And I didn't want to not take the order, right? Because I really wanted it for the business. It was a great store. I wanted the opportunity for continued growth with my artisans, right? Because that was kind of the point. It's like the bigger the company gets, the more artisans I'll be able to employ. And now there was a bunch of them that working for me. So I was also feeling that pressure. And I was like, you just have to be able to figure this out. And when you get that order, say you get an order in January, right? You need to

deliver that in May. They're really not going to be paying you until like June, July, August, somewhere in there. So you have to find a way to get it to them. And that's when there's a lot of like dark capital that can get into the mix there. And now there's also a lot of fintech companies that are making loans even more accessible, but the interest rates are absolutely insane. Yeah, absolutely insane. I mean, we've seen like loan sharks go online, but it's still the same predatory lending situation for somebody in a similar spot, whether they have a consumer product company

or not, or they're looking for funding. Are there any red flags with this lender that you saw in retrospect that folks should look out for if they're looking at a lender? God, I think for me, the way that he structured it was that moving forward, any other deposits that I was getting from my retailers, he would hold it in an escrow and then I would have to get a new loan from him, escrow and then I would have to get a new loan from him, which truly made no sense. It doesn't make sense to me. It doesn't make sense.

Right. It doesn't make sense. So like if you got money from, let's say you sold, you know, whatever to a big boutique and you got money after it was delivered, net 30, net 60, whatever, that money would go into an account that you couldn't touch. Well, he would collect all of that money, right? Because the idea with like factoring and purchase order financing is they'll loan you the money in advance, right? And then that's what you use to pay for it. And then they essentially own that whole purchase order. And so then they collect that money directly. But then the following season, for example, the vast majority of all of my accounts were giving us deposits. So the following season,

let's just say I had a million dollars in orders and my stores were giving me $400,000 in deposits to help fund the production as soon as they sent in the order. He would hold that four hundred thousand dollars and put it in an escrow. For not the order that he lent. Right. For the new orders down the road and say, oh, if you need any money for these purchase orders, which I now own, let me know what it is and I'll issue it to you as a very expensive loan. He was like your pimp. Basically. So once I signed that contract with him, I never saw a penny of our wholesale orders ever again until I paid him off. And then the debt just also kept growing. It was like five

years or something. It was crazy. And you said that this was the contract that you didn't send to lawyers, but at what point did you get lawyers to help you get out of this? And what did that look like? In the beginning of 2020, I went to therapy camp, basically, this place called Hoffman. And I was like, I have to get control over my business. Like I have to, it's so funny because I thought that I was going to go to Hoffman and have this whole experience where I just like become more creative and like, don't care about business and I'm fine. But it was like the complete opposite. I was like, I need to get control over my business. I need my business to grow. And I want to make sure that like artisan based fashion brands can take space from like sweatshop based brands.

And one of my friends who knew about this, who I talked to about this was like, you have to just call a lawyer, like talk to my lawyer. I already told him, like talk to him. And so I talked to him and I hired a new CFO and, and they were just like in shock. I'd never seen anything like that before. And I felt so seen because the whole time, I mean, he would just tell me that I was a horrible business person. It was really like abusive relationship. It was really abusive. That's why I was puking in the alley because it was so terrified, you know? And then

I was like, wait, it actually isn't me. Like, yes, I made a bad decision by signing this loan, but like, there's no one really that would have been able to work themselves out of this the way that it is. As a side note, I signed up for Hoffman. I was supposed to go in a couple weeks. I just canceled it because I was like, I don't know if I can handle like trauma therapy right now. I think for me, what it was, was this opportunity. Like, I mean, I've been carrying so much baggage around with me my whole life. I'm like a Sherpa. And so in the beginning of 2020, I went, and I think for me, it was just an opportunity to like put down my bags and go through them and say, okay, yeah, if I'm going to be carrying this, like I at least want to know what is in the baggage that I'm carrying.

Cause there's so many things that I was just like, I'm going to put this away for later. I'm going to put this away for later. Just keep carrying this baggage. And I think that like 10 days or whatever it was, was a real opportunity for me to kind of sit down and unpack all of that. And one of the things that I really dealt with so much in my life was disappointment, like from family, from lovers, from friends or whomever. And when I was there, I sort of also realized that in times where I was disappointed the most, I'm not really sure that the people who disappointed me were ever really aware of what I needed. And so I kind of promised myself to moving forward, make very clear asks of people, of institutions, of the world, of friends,

of people, of institutions, of the world, of friends, of lovers. And then it gives other people the opportunity to say, okay, yes, I can meet you at this or no, I'm uncomfortable. That's my boundary. Or I can't do that, but I can meet you here in the middle. And then I can decide what I want from that. Right. And I think that that lesson that I learned there has been monumental in my personal life and by and large monumental in my business life. And I know for a fact, it's very Pollyanna, but like, I know for a fact that I would not be where I am now if I didn't take that week to myself, because also the pledge wouldn't have been possible if I hadn't have done that because the 15% pledge was me making an ask.

Hold onto your wallets. Money Rehab will be right back. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct

deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN.

Chime. Feels like progress. Banking services and debit card provided by the Bank Corp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. And now for some more money rehab. So from that experience, you came up with the 15% pledge or you just got comfortable

with the idea of asking things of people and organizations? I had a big takeaway of making sure that I always ask for what I need, right? And so in 2020, pandemic energy, George Floyd gets murdered. People are kind of calling me and texting me and saying like, you know, and it was all really well-intended. It was like people who own businesses would be like, Hey, can you look at this press release for me? Can you look at this Instagram caption? And to be honest with you, Nicole, like I spent the first couple of days editing people's Instagram captions and stuff for them, which I was happy to do. Right. But a lot of these major corporations were calling me and saying like, okay, like, do we need to donate to the NAACP or Black Lives Matter? Like, which one is better? Those sorts of questions.

And it was a challenging time because for me, I'm normally pretty good at helping people figure out what they can do that's going to be impactful in a personal way. And I've worked a lot with Brother Valleys and with other organizations, Planned Parenthood and doing a lot of advocacy work in policy and political space and all of that, Truth in Lending Act, given my experiences with the factor. And I got a call on the Saturday after George Floyd was murdered from someone on behalf of a major retailer. And I got a call on the Saturday after George Floyd was murdered from someone on behalf of a major retailer. And it was a retailer that their headquarters was based in Minneapolis. George Floyd was murdered in Minneapolis and they had just donated $10 million to the NAACP. And

this person was like, people are still really mad at them though. And I was like, okay, well, you know, black people spend more than $10 million at that store, like on any given day. Right. And so again, that's totally nice, but it's not going to heal the pain. Right. And also, you know, if your friends makes a racist comment to you, you don't say like, oh my God, Gary, that was so racist. You need to make a donation. Right. You say, Gary, that was racist. Let's talk about why you think or feel that way. You kind of try to unpack it a little bit. And she was like, well, what would you want them to do? And I was like, well, I really think that the best way to help is to do what you do best at in service of people who have been historically excluded, right? And she was like,

okay, what does that mean in this context? And I was like, well, you know, black people are almost 15% of the population. Major retailers should consider committing 15% of their shelf space to black owned businesses in America. And at that time, I was a black business owner. I was really paying a lot of attention to the data. They were saying 44% of black owned businesses were projected to close as a result of the pandemic. 90% of Black-owned businesses did not get access to the first round of PPP money. Like it was really seeing that Black-owned businesses were being disproportionately impacted by the pandemic. So I had that idea. I said, you know, they should commit 15% of their budget to buying and stocking Black-owned product. And

she was kind of quiet on the phone line and she was like, no one's ever going to do that. And I was like, okay. So we got off the phone and I really kind of just sat and thought a little bit more around the idea. And I thought about if we, the retailers started committing in that way, the impact it would have all across the country, how venture capital would be forced to take notice and large financial institutions would realize that there's a lot more opportunity there with Black entrepreneurs. And I just kind of typed out all of these ideas and my thoughts in the notes section of my phone, which is where I think most of our brilliant ideas are buried. And I, an hour later, posted it on Instagram and tagged a bunch of major retailers that I thought should commit to this idea of the 15% pledge. And that was on a Saturday. I stayed up overnight with my web

designer on a Sunday and we launched a petition on Monday at noon. By Tuesday, it had like roughly 100,000 signatures. By Wednesday, I registered it as a nonprofit. And on Thursday, I was like on CNN and the New York Times talking about the idea and why I thought it would be impactful to the American economic landscape. And by day 10, Sephora became the first major corporation to commit to the idea of the 15% pledge. And that was three years ago, almost to the day. And since then, we've signed 29 of the biggest retailers across the country. They all sign multi-year contracts with us. We audit them every quarter. Nordstrom's a 10-year

contract, for example. And through those contractual commitments, we're now in the process of reallocating over $14 billion to Black and Brown entrepreneurs across the country. We've put over 625 Black-owned brands onto the shelves of retailers across the country. We've put over 625 Black-owned brands onto the shelves of retailers across the country. And we're one of the fastest growing nonprofits also in the country, which is crazy. I'm so proud of you. It was amazing to see it take off.

I read that you got texts though from people saying like, this is crazy. This is too big of an ask, right? What was your response to those people totally i mean everyone's entitled to their opinion i think that i think the thing about magic in a bottle is like what you don't do is like open it around and open it up and pass it around and let everyone take a sip right because it's going to dilute that i delete the magic and everyone's always like you know perfection is the enemy of, of, of good

or whatever they say. Right. It's like, I think the number one best thing that I didn't do was like phone a million people for their feedback on the idea. Cause I would have never, I would have never launched it. And I think it was a complicated time, right? Like people were talking about defund the police and all of these other things, which are important. But at the end of the day, like I'm also a money girl, right? Like, and I understand that, you know, economic justice is really important. And if we want to make a difference in this, in this country, we need people to have economic opportunity. And I thought also it's a really freaking incredible business idea. Like the, I didn't think like, oh, I want these people just to do it because it's a

nice thing to do. I was like, this is actually going to be an incredible business proposition. Like I know my customers, I know that my customers care about a founder, about a supply chain, about how things are made, about, you know, whether that company is advocating for, you know, the causes that they believe in. And in general, that's a trend that we're seeing in the market. And so, you know, you can ignore that and just continue to buy all of your products from Procter & Gamble, or you can diversify and start buying from more female or founders of color, right? Like, what do you want to do?

I mean, you know, so many people ask me like, what do you think of the companies that like aren't taking the pledge? And I'm like, I don't know. What do you think about Blockbuster? It's like, you're not thinking about Blockbuster. I'm not thinking about the companies that didn't take the pledge

because they're dinosaurs, right? It's like, stay with the times. I don't know. I love that response. Yeah, I mean, because you vote for policies, you vote for change with your wallet. And we've talked about on this show many, many, many, many times that the private sector should be doing more to close the wealth gap. So here you are doing that thing. Thank you.

Of course. My pleasure. To close our episodes, we ask all guests for one piece of money advice that they can take straight to the bank. I think, I mean, I've definitely learned all the things not to do. I talk about that a lot in my book, but I think for me now, and also as someone who has a private equity fund, the important part is when it comes to investing, which I think is something that we all need to do and we need to be less afraid of doing it, figure out what your superpower is, right? Like I know women, I know women who are powerful and who are largely unseen or underappreciated. I know as a woman, what kind of products I'm missing. And so as a $5,000 investment you're making in one of your friends, whether it's like $500 that you're putting onto, you know, Kiva.org and helping a

woman somewhere in the world with her proposition, play to what your superpower is. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.