What’s the problem with a merchant cash advance?

A merchant cash advance is an expensive way to obtain funding. The repayment costs can be steep. With that, there’s a risk of getting trapped in a cycle of debt. 

Why would someone choose to take out a merchant cash advance?

The lack of credit requirements makes merchant cash advances an attractive choice for business owners with substantial credit card sales. Although the funding comes quickly, repaying it can be a big burden. 

Can a financing company sell my merchant cash advance?

Yes, a financing company can sell your merchant cash advance. Once sold, the new owner has the right to collect based on the terms of the contract. 

What happens when you default on a merchant cash advance?

If you default on a merchant cash advance, your business is open to lawsuits from the advance company. However, this default won’t impact your credit score. 

How can my business use a merchant cash advance responsibly?

Before taking out a merchant cash advance, consider the reasons for the funding. If you are funding a growth opportunity or covering an unexpected expense, that might be a good choice. But if you are trying to make ends meet for your business, taking on an MCA will only cut further into your cash flow.

If you are considering a merchant cash advance, make sure to consider all of the costs before signing on the dotted line. Don’t move forward if it will create a hardship for your business. 

Final Word

As a business owner, you now know how to get out of a merchant cash advance. Although it’s often a stressful situation, take the time to weigh out all of the options. You don’t want to jump from one bad financial situation to another. Consider which method will improve your business’s financial situation in the long term.

When you find the right fit, move forward immediately. 

About the Author

Sarah Sharkey

Sarah Sharkey

Personal Finance Writer

Sarah Sharkey is a personal finance writer who enjoys helping people make better financial decisions. Sarah enjoys traveling, hiking and reading when she is not writing.

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