Is a merchant cash advance legal?

Yes, merchant cash advances are legal in the United States but are not regulated by federal law like many other loan options. They are organized and regulated differently than other forms of credit, mainly to accommodate the need for a quick capital infusion for small businesses. Many banks and private financial institutions offer merchant cash advances as one of their loan products, but these should not be your first choice, if possible. 

What are the pros and cons of getting a merchant cash advance?

Pros of getting a merchant cash advance include:

  • Quick access to working capital. Merchant cash advances provide business owners with immediate access to working capital in a matter of days rather than weeks or months.
  • High approval rate. Merchant cash advances often have higher approval rates compared to traditional loans, making them more accessible to business owners with poor credit.
  • Easier repayment. In most cases, repayment of a merchant cash advance is directly tied to credit card sales, so repayment is often easier to handle than a lump sum payment.

Cons of getting a merchant cash advance include:

  • High cost. Merchant cash advances often come with high fees and interest rates, making them an expensive option.
  • Repayment unpredictability. Since repayment is tied to credit card sales, merchant cash advance repayment can be unpredictable and vary widely from month to month.
  • Default risk. Defaulting on a merchant cash advance can be difficult to recover from, and may harm your overall credit score.
Is merchant cash advance consolidation available to businesses?

Yes, businesses can explore merchant cash advance consolidation options to manage outstanding debt. Many lenders offer merchant cash advance consolidation options that allow you to pay off multiple cash advances and reduce the cost of your monthly payments. Consolidation may also help you reduce interest payments and improve your business’s cash flow. 

What are the best merchant cash advance companies?

The best merchant cash advance companies depend on your individual needs as a merchant. Generally speaking, the most reputable merchant cash advance companies are ones that are licensed, highly rated, and offer terms that match the needs of the merchant. A few examples include Credibly and Reliant Funding.

About the Author

Christopher Murray

Christopher Murray

Personal Finance Expert

Christopher Murray is a professional personal finance and sustainability writer and editor who enjoys writing about everything from budgeting and saving to unique investing options like SRI and cryptocurrency.

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