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Why are Merchant Cash Advances So Dangerous?

BizRelief is committed to helping you get rid of your merchant cash advance debt.

As a small business owner, you should be aware of the dangers that a merchant cash advance can bring to your business and your personal finances.

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Negative Effects of Merchant Cash Advance Loans:

  • Extremely High APR: A merchant cash advance (MCA) can have extremely high annual percentage rates, with some reaching 300%. This can end up costing you much more than a traditional loan or a business credit card.
  • Paying Faster Means Nothing: Generally, repaying a loan quickly helps you save some money in interest rates. However, a MCA has you paying back a set amount of money, so you won’t end up saving anything by paying faster.
  • Potential Credit Check: One of the benefits of MCA’s is that they have a greater level of availability than a standard loan. However, MCA providers can still choose to run a hard check on your credit, which can result in your score going down.
  • Confusing Contracts: The contracts that bind you to a merchant cash advance are intentionally confusing. Much of the language used in the contracts can make it hard to compare a MCA to other financial aid products.
  • Falling Into a Debt Cycle: The worst outcome of having a merchant cash advance is the inability to escape a debt cycle. The repayment process can create financial issues that may facilitate the need for another MCA (especially if your credit is poor). This can put a colossal strain on your business and lead to a potential downfall.

 

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