mca relief
Updated October 08, 2021

Merchant Cash Advance Relief: 8 Strategies to Escape an Expensive MCA

Small Business Loans

When business owners need cash quickly to take care of immediate debts, they sometimes turn to merchant cash advances. These advances allow businesses to quickly shore up any holes in their finances. That can be especially appealing for business owners who don’t have the time to wait for a traditional lender to decide their fate or who are worried their credit score will result in their loan request being denied.

But sometimes, entrepreneurs realize that a merchant cash advance is no longer in their best interest. They begin to think about merchant cash advance relief.  When that happens, it’s time to focus on damage control. That means coming up with an exit strategy that will do as little damage as possible.

Getting out of an MCA can be tricky because they aren’t loans, and they aren’t as tightly regulated as the loan industry.

Logan’s Note: As a CPA, I’ve developed a network of trusted professionals to help business owners obtain merchant cash advance relief. If you are dealing with $50,000 or more in high-interest business debt, please email me directly at [email protected] with the subject line HELP – BUSINESS DEBT.

Why Merchant Cash Advances Are So Terrible

MCAs are widely used, so it’s normal to wonder, “How bad can they be if people keep using them?”

While they are one option for funding that business owners have, they are near the bottom of solutions business owners should look at when they need money. People should exhaust all their other options before turning to merchant cash advances. And if they’re locked into one, they should strongly consider getting out. Let’s look at the reasons why.

Merchant Cash Advances Are Predatory and Use Deceptive Advertising

What makes MCAs so dangerous is that they generally aren’t straightforward about their terms. The deceptive practices and language someone who takes out one of these cash advances may face includes:

  • Through-the-roof APRs: Merchant cash advance companies can make the offer look attractive without actually informing a business owner that they may pay an astronomical annual percentage rate. Clever wording can trick a business owner into thinking they are getting a much better rate than they really are. They may use terms like “specified percentage” that can make people think that’s their APR, when it’s not.
  • Confessions of judgments: Since many people confuse merchant cash advances with loans, they sometimes don’t read the fine print. Often these companies require their customers to sign a confession of judgment before they give the business owner any money. A confession of judgment may be a new term for business owners. But they should never agree to it. It gives the merchant cash advance company an unfair advantage — they can use it to collect money from their customers without having a trial, even if the debt is under dispute.

Merchant Cash Advances Take Advantage of Desperate Business Owners

When business owners turn to MCAs, it’s usually because they’ve exhausted all other options. They are in a major bind and the lenders know it. They can get away with charging sky-high APRs, just as payday lenders do with their customers.

People who agree to MCAs generally need money fast to keep their businesses open and paying the bills. They often don’t have the best credit scores. Since people can get their cash quickly and they won’t be denied as they might for traditional business loans, they are willing to agree to things they might ordinarily not.

To make matters worse, many business owners don’t understand how expensive an MCA is because MCA brokers make them sound much more affordable than they actually are. And once they are using an MCA, it can be hard to exit because they’ll keep using them just to stay afloat. It’s comparable to people who take out another predatory payday loan to pay off the first one they took out. It can be a never-ending cycle of debt. MCA brokers know that and count on it for repeat business.

Merchant Cash Advances Are Intentionally Confusing

Remember earlier when we referenced confessions of judgment? That’s just one way in which MCAs are intentionally confusing. Most business owners won’t have a clue as to what that means. They’ll just sign the agreement eagerly anyway to get a quick infusion of cash to stay afloat.

Merchant cash advance companies don’t want their potential customers to figure out how bad of a deal they’re being offered. Never mentioning potential APRs adds to the confusion.

Instead of using APRs, which business owners are used to with their other loans, they need to try to figure out their factor rate and what it might mean to their daily sales. Since they aren’t used to dealing with this repayment method, they might not fully grasp how much money they’ll be handing over every day through their sales.

Also, some companies issuing the cash advance may not be upfront about any hidden fees contained in the contract. By making the contracts intentionally confusing, borrowers don’t understand they’ve been misled until it’s too late.

Merchant Cash Advances Are Extremely Expensive

Although APRs aren’t disclosed for MCAs, they can reach into the triple digits. These agreements are also expensive because of all the fees attached to them and because there aren’t as many regulations in place.

And if you aren’t careful, taking out an MCA can ultimately cost you your business because of how expensive they are.

Merchant Cash Advances Are Hard to Get Out Of

After entering into one of these agreements, business owners generally quickly see how expensive they truly are. But when they explore their options for merchant cash advance relief, they are often discouraged. It can feel like you’ve sold your soul to the devil, that there’s no way to get out of this agreement.

They’ll learn when reviewing exit strategies that MCA lenders can place liens on their business and potentially their personal assets. They’ll learn their accounts can be frozen. That’s scary stuff, especially for desperate business owners. If they’re having trouble keeping their business doors open, they aren’t going to have money to hire a lawyer to sort this all out for them. So, they feel stuck, as if there is nothing they can do. They think their only choice is to keep paying.

While it’s not impossible to exit an MCA, it can be difficult. Those who are stuck in an agreement they want to get out of have eight viable solutions, although some won’t be pleasant.

8 Strategies to Escape Your Merchant Cash Advance

If you’ve entered into one of these agreements and you’ve realized it’s a terrible fit for you and your business, you need to look at solutions. How can you find merchant cash advance relief?

1. Increase Profitability

  • Increase Profitability
      • Basics: You find ways to make more money with your business or cut down on overhead.
      • Pros: You’ll make more money and have a better business model when the MCA is paid off. You’ll pay off the MCA faster by making more profit.
      • Cons: It will require a lot of brainstorming and work.
      • Cost

        Unless you’re adding a new product line, the cost of finding more profits will be low.

      • Time Required

        It can take a considerable amount of time to brainstorm, crunch numbers, and implement changes.

      • Success Rate

        If you make an honest effort, your success rate should be 100 percent. The smallest of steps, like lowering your business’s thermostat during the winter or finding a cheaper internet provider for your business, is something everyone can do, but the question is whether these small steps are enough.

    By maximizing your profits, you’ll be able to pay off your MCA much faster. Let’s say you have taken a $10,000 cash advance and you have a factor rate of 1.4. You’ll have to pay back a total of $14,000. Let’s say you have a holdback rate of 10 percent, meaning 10 percent off of every credit card sale is sent directly to pay off your MCA.

    If you make $1,000 in sales per day, you will be paying back $100 each day until your cash advance and fees are paid off. If you could increase those sales to $1,500 per day, you could pay it off much faster and rid yourself of the MCA that’s dragging you down.

    Not sure how to boost your profits? Here are some tried and true methods you can explore. By implementing several of these at once, you’ll see quicker results.

    • Increase prices: If you offer services at your business, mark up the per hour or per project rate. If you’re selling items, consider a small mark-up on each product or your biggest sellers.
    • Incorporate a new product or service: Figure out what kind of goods or services will sell well in your area and add them to your business.
    • Improve your marketing efforts: Getting the word out about your business or advertising to the right customer base can give your business a boost.
    • Eliminate some overhead: Can you save any building or operations costs that will put more money in your pocket? Perhaps you can keep your business a couple of degrees colder in the winter or cut out the cleaning lady at your business if you’re able to pitch in a bit more.
    • Make sure every position is necessary: Do you have any employees who aren’t pulling their weight or a position that isn’t necessary? Trimming the fat can be hard when you’re the boss, but it’s something that’s vital for a successful business.
    • Add rush fees to your service: If you have the type of business where people will pay more for quick service, add a service fee for immediate service.
    • Network more: This can help grow your business through partnerships with other companies and increase your customer base.

    2. Take Out a Personal Loan

    • Take Out a Personal Loan
        • Basics: Take out a personal loan and pay off your MCA.
        • Pros: A personal loan can get you the money quickly. You’ll have a fixed amount to pay each month — you’ll know what it is so there are no surprises.
        • Cons: Without a good credit score, you may be denied or face high APRs.
        • Cost

          Moderate. There is no cost to apply for a loan, but the fees you face may be significant. Check any loan offers for hidden fees, such as origination, prepayment, and more.

        • Time Required

          Within an hour or two, you can research and apply to loans online.

        • Success Rate

          Low, unless your credit score has improved since you’ve taken out your MCA.

      While your experience with an MCA may have left you understandably shell-shocked when it comes to wanting to take out a loan, it can be a good exit strategy for you. Even if you pay a higher APR than you’d like, you might still be money ahead by doing so.

      This option is going to be much easier if you’ve built up better credit than you had when you agreed to the cash advance. The higher your credit score, the more attractive your loan offers are going to be.

      3. Add a Business Partner

      • Add a Business Partner
          • Basics: Take on a business partner who will buy into your business with a lump-sum investment. Use that money to pay off your MCA.
          • Pros: You’ll get an infusion of cash and reap the other benefits of having a partner.
          • Cons: You’ll have to relinquish some control and split the profits.
          • Cost

            There would be no immediate cost to you. You would, however, lose half of the future profits of your business.

          • Time Required

            It’s a low time commitment method.

          • Success Rate

            That depends on a number of factors — how sound your business model is, what you need for a buy-in payment, and how well you can network to find a partner.

        This won’t work for everyone because some people enjoy owning businesses on their own. But if you wouldn’t mind having a partner, this could be an effective strategy. Since you would already have the business set up, your potential partner could buy into the business with a lump sum.

        While having a partner isn’t for everyone, it can be a tremendous asset to a business in multiple ways, including:

        • You have extra accountability: When you’re responsible for someone else’s dream and not just your own, you may work harder and be more motivated.
        • More hands on deck: You won’t have to do all the work by yourself.
        • Brainstorming sessions: More people means more ideas about how to improve your business model.
        • More resources: A partner can mean more financial resources to improve your business or get through lean times.

        4. Try to Negotiation a Restructure with Your Lender on Your Own

        • Try to Negotiation a Restructure with Your Lender on Your Own
            • Basics: Contact your MCA company and ask if they can restructure the MCA so it’s more favorable for you.
            • Pros: It could save you money, and it’s always easier to work with a company than fight against them.
            • Cons: It would be hard to negotiate, especially if you don’t have much trust with the company because you feel your MCA was unfair and poorly explained to you.
            • Cost

              That depends on what they may charge you to exit the existing agreement and enter into another.

            • Time Required

              It would require a moderate time commitment on your part to make sure you fully understand the terms and repercussions. That can require a lot of research on your part.

            • Success Rate

              This has a low chance of working. Because of the way MCAs are structured and how confusing they are, you’d stand a better chance with a professional in your corner.

          Some lenders will be more receptive to this than others. But it’s worth a shot. Some companies would rather enter into another agreement with you where they’ll make less money than lose you as a customer altogether.

          Think of how credit card companies or cable television companies work. They charge as much as they can for their fees or services until you threaten to take your business elsewhere. Suddenly, they’re sending you offers of reduced APRs and give you a reduced-price cable package for a few months.

          They won’t send you those offers out of the goodness of their hearts. You’ll have to play hardball first by threatening to take your business somewhere else. Be polite, but firm. Call the company that gave you the cash advance and tell them you want to restructure it into something that has more favorable terms or you’ll find another company that will give you a better offer. It’s unlikely to work, but you never know.

          5. Try to Obtain a Deferment or Forbearance Agreement on Your Own

          • Try to Obtain a Deferment or Forbearance Agreement on Your Own
              • Basics: A forbearance or deferment can give you time to recover from the daily hit your business is taking because of your MCA.
              • Pros: It would give you a brief respite from the daily collection of the MCA.
              • Cons: It’s unlikely the company will agree to one. If they do, you’ll be facing additional fees.
              • Cost

                The cost over time could be substantial because of the extra fees the company may tack on to your terms.

              • Time Required

                It would require a minimal time investment.

              • Success Rate

                It would be difficult and confusing to do on your own. Even if the company agreed to it, you might be digging yourself in deeper with worse terms. It’s better to have a professional helping you, and even then, it might not be a good option for you.

            If you can no longer afford to pay the cash advance without the possibility of your business going under, you can call the company that issued it and ask about potentially obtaining a deferment or forbearance for a short term until you can get back on your feet.

            You’ll have to have a compelling reason why things will be better for your business when the deferment period is done. If you don’t have that, there is little reason for a company to agree to your request.

            For example, you may have a monthly installment loan that ends in a couple of months that will free up a lot of cash. Or perhaps the holidays are coming up, and you can show receipts from prior years that show business always picks up substantially then. Those might be reasons for a company to defer an MCA.

            6. Get Professional Help

            • Get Professional Help
                • Basics: You get outside help to exit your MCA with as little damage to your business and personal assets as possible.
                • Pros: You have fewer chances of being duped with a professional helping you. It can be less stressful knowing you’re in good hands.
                • Cons: It may cost you a fee, but it may pale in comparison to continuing to pay on your merchant cash advance.
                • Cost

                  It varies.

                • Time Required

                  It won’t require as much time from you because your professional will be doing a lot of the work.

                • Success Rate

                  It’s much higher than attempting to do it on your own.

              Finding a team of professionals who has dealt with situations like yours may be your best bet.

              This small step can get you started on the process of ridding yourself once and for all of your MCA.

              Logan’s Note: As a CPA, I’ve developed a network of trusted professionals to help business owners obtain merchant cash advance relief. If you are dealing with $50,000 or more in high-interest business debt, please email me directly at [email protected] with the subject line HELP – BUSINESS DEBT.

              7. Write to Your State Representative

              • Write to Your State Representative
                  • Basics: Contact your state representative or attorney general to let them know how predatory MCAs are impacting your business and find out if there is any relief you can pursue.
                  • Pros: You can call attention to an issue that’s affecting many businesses. You could spark a real change in legislation.
                  • Cons: Despite your best efforts, laws or regulations may not change in your state regarding MCAs, so you could be wasting your time.
                  • Cost

                    Despite your best efforts, laws or regulations may not change in your state regarding MCAs, so you could be wasting your time.

                  • Time Required

                    A small time commitment to draft letters and make phone calls.

                  • Success Rate

                    Low. It’s unlikely anything will be done in time to help you exit your MCA. But you might be helping future business owners by speaking up.

                Realistically, some politicians won’t care about your plight. But others will, especially if they see your case as a means to attack the industry as a whole and make a name for themselves.

                Although there can be a sense of distrust toward politicians in today’s times, there are still politicians willing to take on lucrative and powerful industries.

                Some states, like New York, have put tighter rules in place against predatory MCAs. Finding out what your state’s laws and regulations are regarding predatory MCAs may help you.

                8. Declare Bankruptcy

                • Declare Bankruptcy
                    • Basics: Declaring bankruptcy can get you out of your MCA when all else fails.
                    • Pros: You’d be wiping the slate clean, not having to pay the MCA anymore.
                    • Cons: There are a lot of cons to this strategy. Emotionally, filing bankruptcy can take its toll on people. In addition, you’ll be hurting your future. You’ll lower your credit score and will have a hard time getting loans for years to come.
                    • Cost

                      The cost of bankruptcy may not seem bad upfront, but over time, you’ll pay so much more for car loans, personal loans, and a mortgage because of your lower credit score.

                    • Time Required

                      You’ll spend a fair amount of time on the process and taking steps to rebuild your credit.

                    • Success Rate

                      It’s highly successful but destructive to your future.

                  This option isn’t something to enter lightly into. Filing bankruptcy can have implications for every aspect of your life. It can affect how people see you and how you see yourself.

                  Filing bankruptcy to get out of an MCA should truly be your last resort.


                  Shannon Serpette

                  Shannon is a mother of two and an award-winning journalist and freelancer who lives in Illinois. She obtained a bachelor’s degree in English from Illinois Wesleyan University before beginning her 20-year career in newspapers. When she’s not spending time with her children, she is often pursuing her favorite hobbies — running, metal detecting, kayaking, and reading about personal finance.


                  Logan Allec, CPA

                  Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

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