Why you should avoid a Merchant Cash Advance

Small businesses need cash to operate. Much like consumers, small businesses find themselves in a pinch and need capital fast. They may not have the time to go to a bank, and get a Small Business loan, or may not be approved by a bank due to banks having strict lending standards. Many small businesses are turning to a Merchant Cash Advance (MCA loan) to bridge the gap of their financing needs.

What is a Merchant Cash Advance? (MCA) Think payday loan for small businesses. Very high rates, and very hard to payoff! MCAs aren’t technically even a loan. MCAs operate like a loan in the fact that you do receive money just like a loan from a lender, however, how you pay back is very different than a loan. With a merchant cash advance, you’ll be giving up a certain percentage of your future sales. Running a business is hard on a daily basis, can you imagine having a great day of sales, only to be forced to give anywhere from 10%-50% of your sales back to your lender as repayment?!?! Yes, when you get a merchant cash advance, part of your agreement with the lender is you signing over a portion of your credit/debit card sales to the lender. Much like a payday lender debits a consumer’s bank account for repayment of the loan, the MCA lender will take a large portion of your credit/debit card sales as repayment. And they’ll continue to do so until you’re paid off with them. MCA’s don’t stick to the usual lending laws that cap interest rates. Lenders often charge high fees that translate into some of the steepest interest rates of any business loan.

What are my alternatives if a bank won’t lend to my business, and I don’t want a Merchant Cash Advance lender taking a portion of my receivables? At KeyX financial we’re very outspoken against Payday loans for consumers, which automatically makes us outspoken against merchant cash advance loans. At KeyX we’ve helped out tons of small businesses over the years with our Small Business Lines of Credit. Our product is simple and affordable. Once your small business is approved for a credit line, you’re welcome to take all or some of your credit line. Our small business credit lines offer low rates compared to merchant cash advances, and flexible payment options. We allow you to choose a payment that doesn’t hinder your business from operating. We want your business to succeed. Give us a call to speak to one of our account specialists to find out why KeyX’s small business lines of credit are not only lower cost than a merchant cash advance, but also a much more personal friendly one on one service for your small business.