Cash is king and business owners know that harsh reality more than most since oftentimes businesses run into cash crunches at certain times of the year. When that happens sometimes traditional lenders such as banks are not an option and businesses need to reach out to merchant cash advance companies (MCAs). As MCAs grow in popularity, there is concern about an increase in companies claiming to negotiate MCA terms on behalf of business owners. While these services may seem appealing, they come with inherent risks that business owners should carefully consider.

Initially, it is important to address “What is a merchant cash advance?” A merchant cash advance is a form of alternative financing where a business owner receives a lump sum of money in exchange for a specified amount of future receivables. Typically, MCA providers assess the amount a business can receive based on its previous few months of bank statements. MCAs are particularly popular among small businesses that may not qualify for traditional loans, such as those in industries where banks are hesitant to lend (e.g., cannabis companies) or those needing quick funds to complete projects (e.g., plumbing, electrical, or HVAC services). Given the competitive MCA market, providers often deliver the initial payment within 24 hours of application completion.