In late 2024, MyPillow CEO Mike Lindell filed a lawsuit against two merchant cash advance firms, Cobalt Funding Solutions and Streamline Advance, alleging that his company was deceived into borrowing $1.6 million at an exorbitant 409% annual interest rate. This legal action highlights ongoing financial difficulties for MyPillow and a pattern of contentious loan agreements involving high fees and alleged predatory lending practices.
Background of the Lawsuit
The lawsuit was filed in Minnesota and claims that the alleged loan agreement was a sham intended to evade usury laws that limit interest rates on business loans. Rather than an actual sale of future receivables as marketed by the defendants, the agreement was functionally a high-cost loan that imposed severe financial burdens on MyPillow at a time when the company was struggling financially.
According to court filings, MyPillow was required to make 50 daily payments of over $45,000 totaling approximately $2.3 million, alongside an upfront origination fee of $125,000. Lindell and the company assert that the terms were misrepresented, and the costs threaten the viability of MyPillow.
Context of Financial Troubles
MyPillow has faced significant financial challenges in recent years after losing major retailer contracts due to Lindell’s public political stances and claims surrounding the 2020 election. Sales declined sharply, knocking the company from a peak of $300 million annually to repeated losses, prompting Lindell to seek alternative funding.
The reliance on merchant cash advances—often likened to payday loans for businesses—reflects the company’s deteriorating financial health and lack of access to traditional loans or capital.
Related Lawsuits and Legal Issues
This lawsuit marks at least the third legal action involving MyPillow and merchant cash advance lenders in recent months. Prior lawsuits include claims from Lifetime Funding for a $600,000 advance and Shine Capital Group over a $2 million agreement, both alleging MyPillow defaulted on repayments.
Meanwhile, Lindell filed a federal lawsuit against Lifetime Funding asserting racketeering (RICO) violations and fraud, highlighting the ongoing legal complexities surrounding MyPillow’s attempts to manage debt.
Legal and Industry Implications
Merchant cash advances commonly target financially distressed companies, charging steep fees and high effective interest rates that often lead to a cycle of debt and litigation. These agreements typically escape stringent federal regulation, raising questions about consumer and business protections.
Lindell’s lawsuit underscores growing concerns about transparency in alternative business financing and potential abuses in the industry.
CEO Mike Lindell’s Public Statements
Lindell has publicly expressed the dire financial situation at MyPillow, admitting to being cash-strapped and relying on personal assets such as his home and vehicle. He has framed the lawsuit as a battle against predatory lenders exploiting struggling businesses.
Despite ongoing legal and financial hurdles, Lindell remains a prominent figure in media and political discourse.
Conclusion
The MyPillow loan lawsuit highlights the precarious financial position of the company and its CEO Mike Lindell amid contentious merchant cash advance agreements and mounting legal battles. The case exposes the risks small and medium-sized companies face when turning to high-cost alternative financing during times of distress.
As litigation proceeds, it raises broader questions about regulatory oversight, lending practices, and the future viability of companies embroiled in complex financial disputes.
