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Featured Insight
Understanding the Risks and Alternatives to Merchant Cash Advances
Ben T. Nicholson
President
At a Glance
MCAs provide quick cash to businesses in exchange for a percentage of future receivables, often in the form or credit card transactions, but they come with significant drawbacks.
A business receiving $100,000 through an MCA with a Factor Rate of 1.28 will end up paying interest as high as 54%.
For businesses that utilize MCAs, it is imperative that they run careful cash flow projections to avoid overextension.
“When you have 82% interest, you have a lot of wiggle room to push that thing down and still cross your own break-even point, even if you have bad loans in there.”
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