Usury Laws

That’s the legal position most new small-business lenders take. Rather than advancing money at interest, they’re buying a portion of someone’s future sales at a discount, they say, and therefore don’t have to follow state usury laws that cap interest rates or be licensed by state regulators.

Kalamata’s rates are relatively low for the industry, according to Rohit Arora, co-founder of Biz2Credit, who said rates have topped 200 percent. Arora said he tries to avoid lenders who charge more than 30 percent.

“It’s both an ethical thing, but also every state has a usury law,” said Arora. “Right now, it’s not very clearly defined on how much small-business lending is covered.”

Jared Hecht, the 27-year-old co-founder of Fundera, an online loan marketplace that’s planning to work with Kalamata, said the industry is “in the first inning.”

“Ultimately, the good side will be that small-business owners should theoretically be able to run a competitive process and get the lowest rates,” he said.

Codename ‘Professor’

Mandis has long positioned himself in some of Wall Street’s most profitable businesses. He joined Goldman Sachs’s mergers and acquisitions department in 1992 after graduating from the University of Chicago, where he was written up in the New York Times for disarming a gang member as part of a student patrol group. The story said he went by the codename “Professor.”

He switched to the firm’s Special Situations Group, whose bets with the bank’s own money became so profitable that its head quit because his $70 million pay wasn’t enough, the Wall Street Journal reported in 2007.

Mandis, who describes his career as a search for meaning and challenges, left Goldman Sachs in 2004 for a hedge fund, then advised consulting firm McKinsey & Co. and was chief of staff to Citigroup Inc.’s president after its bailout.

“If I’m choosing something to do, there has to be some intellectual curiosity related to it, because that’s how I’m driven,” Mandis said.

He enrolled in 2009 at Columbia University, where his work for a Ph.D. in sociology formed the basis for his book. He also teaches at the university’s business school and has tutored Harlem teenagers in financial responsibility. In a 2010 CNN segment about Mandis, one of the high school students compared their sessions to taking singing classes with Beyonce.

‘The Opportunity’

In “What Happened to Goldman Sachs,” Mandis described how the firm adopted a legalistic approach that enabled it to make more money. Unlike Greg Smith, the Goldman Sachs banker who quit in 2012 and wrote a New York Times editorial calling the firm toxic, Mandis said he isn’t blaming anyone for what he calls a slow cultural drift.

“Of course, the sense that one is doing God’s work or serving a higher purpose can easily transmute into a holier- than-thou attitude and an excuse for any behavior,” he wrote in the book.

Mandis recalled asking colleagues about small-business loans while working at Citigroup. Some were skeptical.

“They had heard the rates or they’d heard the word ‘subprime’ associated with it somehow,” Mandis said. “People didn’t want to talk about it, focus on it. I also thought that was the opportunity.”

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