What Is A Merchant Cash Advance? Risks, Benefits & Relief Options Explained

If you’re a small or medium-sized business, keeping yourself out of the red can be tough. You need to expand your operations to make more money, but you also need money to expand your operations! That’s the reason why many startups and smaller businesses are turning to merchant cash advances, also known as MCAs. But are they right for your business? 

Why MCAs Are Popular

First, let’s take a look at what MCAs actually are. MCAs are becoming an increasingly popular financing choice for small businesses due to their relatively lax eligibility requirements and their ability to provide organizations with instant capital. One 2022 survey published by the Federal Reserve found that 10% of small businesses sought MCAs, with companies in the retail and food industries making up a large portion of borrowers. 

There are many reasons why this option is so attractive to business owners. The biggest one is, as mentioned previously, the fact that MCAs are easy to qualify for. Banks and other traditional lenders require lengthy application and approval processes and will usually perform a thorough review of your credit history, financial statements, and collateral - things that a smaller business might not have in-depth records of. But because MCAs rely entirely on sales volume, even companies with bad credit scores will be able to take a loan out.

MCAs also have a fast turnaround time, and sometimes they’ll be approved within 24 hours. This can be helpful for businesses that need to address cash flow challenges or unexpected expenses quickly.

The Catch

In spite of their benefits, MCAs are known to be one of the most expensive financing options available and typically sport high annual percentage rates (APRs) - this can potentially impact a business’ working capital during slow periods and result in an overreliance on advances, forcing the company to continuously borrow new MCAs to cover essential expenses.

There’s also the fact that the MCA industry isn’t as heavily regulated as other industries in business financing. Companies that aren’t careful may find themselves facing hidden fees or predatory lending practices.

In general, MCAs are really only meant to be a temporary solution for cash flow issues. Businesses that end up relying too much on them will find themselves in debt before long.

What to Do if Your Business Has MCA Debt

But what happens if that business ends up being yours?

It’s not the end of the world. In fact, a trusted debt relief company will be able to help you, especially if they specialize in MCA-related debts, like MCA Reduction.

To help businesses that are trapped in a cycle of dependency, these companies offer a range of legal and debt relief services that are designed to address MCA-related debt. Really good ones will have you working directly with a team of experienced attorneys and MCA debt specialists, who will negotiate with lenders to settle your business’ debt - some will be able to net you reductions of up to 80%! 

You’ll also typically get weekly payment plans that will allow you to immediately increase cash flow for your business. Follow these plans, and you’ll potentially pay off your debts within several months of enrolling in a program.

MCA debt may be hard to get out of, but it’s not impossible. Before you take out more advances, make sure you consider your debt relief options! 

MCA Reduction
City: Melville
Address: 20 Broadhollow Road
Website: https://mcareduction.com/