(FiveNation.com)- Stacy Abrams’ financial technology business NOW Corp. (formerly NOWaccount) managed to get $29 million in new financing from a private equity group in late 2021, just three years after it was discovered that taxpayers paid out fraudulent loans made by the company that Abrams helped launch.
Interestingly, Abrams’ net worth was believed to be merely $190,000 in 2018. NOW Corp.’s fortunes altered in three years, but Abrams’ net worth climbed to $3.17 million within the same period.
While most media stories attribute Abrams’ considerable rises in net worth to speeches and advances for book projects, her investment in Now Corp. has gotten little notice, even though she still owns stock in the corporation.
Through the analysis of record requests and financial data, the Government Accountability Institute, where I work as a distinguished fellow, has carefully put together what transpired with Now Corp. when Abrams was an elected representative in the Georgia House of Representatives.
Abrams, who is running for Governor of Georgia again and has declared her intention to run for President in 2040, has been vague about her participation in a sweetheart deal her firm struck with the state in 2013.
In 2018, Abrams informed a reporter that she “walled herself off” from her company’s interaction with the state government agency that did business with NOWacount.
However, papers examined by GAI show that Abrams was an essential part of the application process for a state government small business loan program that would benefit NOWaccount.
When NOWaccount had just $100,000 in income in 2013, the Georgia Department of Community Affairs (DCA) assisted the firm in tailoring a federal loan program that would help it become more lucrative. When NOWaccount tried to encourage other states to implement a similar scheme — states where Abrams was not a member of the legislature – no other state was willing to take the same approach.
Abrams’ company was essentially permitted to act as a private lender and implement NOWaccount’s unique business model.
The business idea of NOWaccount was to buy receivables from companies that had not yet been paid for services rendered. NOWaccount gave the company money in exchange for the right to recover overdue amounts in exchange for a charge. Abrams’ company’s financial success was built on reducing the number of clients who defaulted on their loans.
And here is when NOWaccount’s relationship with the Georgia DCA came in handy.
Because of the unusual connection with the Georgia DCA, taxpayers were held responsible for NOWaccount-approved loans that were not paid. This benefitted NOWaccount’s bottom line as well as Abrams’ investment.
In 2013 and 2014, Abrams and her partners utilized two organizations to help small businesses use the government loan program signed into law by President Obama to help them recover from the Great Recession. The initiative gave state governments $1.5 billion to set up credit schemes backed by the federal government.
Nonprofit credit unions supported one of the NOWaccount’s businesses, while “a significant private equity group” sponsored another. The second business would most likely need to yield better returns to attract private equity.
When these businesses — formed and managed by NOWaccount – failed on their debts, the government program would compensate them with public dollars.
Small Business Credit Cooperative (SBCC), supported by private equity, recorded three times the amount of loan defaults as Trade Credit Guaranty Corporation (TCGC), funded by non-profit credit unions. One explanation for the disparity might be a propensity to take on riskier (and more profitable) loans to satisfy private equity.
In a Harvard Business School case study, Abrams’ business partner stated that NOWaccount’s use of the federal loan program “allows us to grow quicker since the government, not our lenders, is in the first-loss position.” In other words, if taxpayers are responsible for poor loans, the corporation will be able to attract additional investors.
According to state officials, the Georgia DCA canceled the program before it formally expired in 2017 because of rising losses.
Abrams’ campaign website now highlights her objective of “getting money back in people’s pockets” as she prepares to run for governor again.