17 Feb Is a merchant cash advance right for my startup?
Merchant cash advances, while boasting the advantages listed above, also come with a fair share of disadvantages. For that reason, they're not always the best funding option for your business. We've listed a few reasons why an MCA isn't for everyone.
Merchant cash advances aren't regulated
Unlike highly regulated banks and lending firms, merchant cash advance providers aren't bound by legal restrictions. For that reason, some MCA contracts charge extremely high interest rates and tack on unreasonable repayment terms-capitalizing on potentially desperate business owners.
They're more expensive than traditional loans
Compared to other financial products, MCAs are comparatively more expensive. While business loan rates generally range from 6.25% and 12%, merchant cash advance rates can fall anywhere from 5% to 20%. In fact, the annual percentage rate (APR) for an MCA fee can be as much as 200%.
Your business operations could be limited
As with almost everything in life, there will always be a small subset of the population that tries to cheat the system. Merchant cash advance companies need to protect themselves against founders who have received a merchant cash advance but then encourage their customers to pay by cash.


