Small businesses looking for extra, quick cash may look into a Merchant Cash Advance. This is a quick option with, what seems to be little hassle. Merchant Case Advances aren’t technically loans — they represent a purchase of your advanced sales. Essentially you sell your future credit card and debit sales to a company in exchange for cash up front. What is least known and most frightening isthe lack of state or federal regulations associated with them.
There is no federal oversight in the form of regulation or enforcement in limiting how much interest a Merchant Case Advance company can charge. The one type of regulation these companies fall under is from the Uniform Commercial Code. This code helps regulate business transactions in a similar way especially for businesses that have borrowed money, lease equipment and sell goods in more than one state. But that code does not regulate interest rates.
Even the Consumer Financial Protection Bureau does not have the authority to regulate MCAs. The Federal Trade Commission is involved primarily to make sure providers do not misrepresent their products or participate in dishonest practices.
Some online lenders create their own kind of self-regulation. For example, the Innovative Lending Platform Association is a trade organization focused on best practices and standards in the industry. There is also the Responsible Business Lending Coalition’s Small Business Borrowers’ Bill of Rights.
In conclusion, many of our clients are not aware of how much a Merchant Case Advance really does cost their business. For clients who first go to a Merchant Cash Advance, they find their debt growing and they call American Finasco for debt resolution. They should have called American Finasco first to solve their original debt.