American Finasco > Blog > Merchant Cash Advances – A vicious cycle

Do you find yourself stuck in a Merchant Cash Advance(MCA) that you cannot pay?

Does this sound like you?

You took a $25,000 business cash advance for six months.

The person selling this to you made it sound easy stating your payments as “just $250 a day.”

But, even with your business savvy skills, you didn’t realize that was $5,200 a month? And, making $5,000 or more payments on a $25,000 advance doesn’t sound like a good idea when you think in terms of monthly revenues and expenses, does it?

And now, those $5,000 or more payments are killing you!

So, you find yourself taking out a second advance, just to keep up with the first advance’s payments. And now, you are officially caught in the vicious MCA cycle.

Many small business owners cannot afford to take on such expensive debt. These huge payments suck up every cent of profit keeping you with a large amount of debt and no way out.  There is an intentional absence of information given by MCA companies to make it sound worthwhile, when it is not. This is just one reason why these companies have such a poor reputation.

A Merchant Cash Advance is not a loan—it’s a sale! Merchant Cash Advance companies purchase your future credit card sales. And because it’s not a loan, Merchant Cash Advance companies are not held to the same federal regulatory oversight like other lenders.  MCAs are not obligated to state usury laws that prevent charging high-interest rates, thus allowing them to set the payback at their discretion. The fact that Merchant Cash Advance companies aren’t “lenders” is a technicality that allows these providers to operate in a largely unregulated market.

As long as a Merchant Cash Advance is still a purchase of receivables—and not a loan—these companies will not be subject to usury laws that prevent lenders from charging outrageous interest rates.

American Finasco prefers to work with clients before they consider MCAs. But if you find yourself in debt because of MCA’s – we can help renegotiate your business debt. Contact us today to get your business on the right track! Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.