Have you been inundated with texts, calls, emails and WhatsApp messages from shady characters offering you quick funding?

If so, you’re not alone. Small business owners across the United States have been receiving these urgent pitches since the middle of last year, when unexpected tariff bills began, NPR reported. For importers of both branded merchandise and retail products, claiming their goods from ports suddenly required instant cash that they likely didn’t have on hand.

The incessant offers aren’t necessarily tariff-related, though. One merch supplier executive who wishes to remain anonymous has shared a dozen related text messages from random phone numbers with PPAI Media.


“I don’t need funding and more importantly know better than to deal with these predatory loan shark spammer scum,” the supplier exec says.

Beware Merchant Cash Advances

These solicitations often evolve into a merchant cash advance, which is a lump-sum payment a business receives in exchange for a percentage of its future sales.

MCAs were originally designed to help merchants leverage credit card and point-of-sale data for fast access to working capital, keeping them stocked and operational during peak periods, according to Daire Burke, head of the North American division of Swoop, an international credit broker. “What started as a practical cash-flow tool has since morphed into something far more expansive and, in too many cases, predatory,” Burke tells PPAI Media.

Because MCAs can be easier to qualify for than traditional business loans, entrepreneurs with low credit scores or without a credit history – and who need quick cash – may be enticed. However, MCAs have many risks associated with them.

What started as a practical cash-flow tool has since morphed into something far more expansive and, in too many cases, predatory.”

Daire Burke

Head of Swoop North America

“Merchant cash advances often carry very high fees and are repaid based upon a percentage of the company’s daily sales,” Joe Braier, CEO and president of Wisconsin-based Lake Country Advisors, tells PPAI Media. “Because the payment amount is tied to sales, MCAs can place an added strain on the company’s financial performance, especially during months of low seasonal revenues where cash flows will fluctuate significantly.”

The total cost of borrowing is typically based on a factor rate rather than an interest rate or annual percentage rate.

  • A factor rate is usually between 1.20 and 1.50. For example, if an MCA has a factor rate of 1.50, the business must repay the entire advance amount, plus an additional 50%.
  • MCAs typically have a repayment period of three to 18 months.


In addition to the factor rate, MCA providers might charge additional fees, such as origination fees, which range from $1,000 to $3,000 per MCA, according to The Wall Street Journal. Holdback rates, which are the amount of daily credit and debit card sales the provider charges to repay the advance, are usually 10% to 20% of daily sales and are deducted until the balance is paid in full.

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MCAs aren’t technically loans, so lenders don’t have to abide by most lending laws. There’s no legal limit to the fees they can charge, and because the debt is usually due within months, an equivalent annual interest rate can be enormous.

“The challenge is compounded by the aggressive marketing that saturates small business owners with MCA offers, while the risk aversion of traditional financial institutions leaves a financing gap that these products are all too willing to fill,” Burke says. “The result is an environment where business owners struggle to see the full spectrum of funding options available to them and aren’t in a position to make the choice that best serves their needs.”

  • Financing by MCA providers is estimated to have increased from $8.6 billion in volume in 2014 to $15.3 billion in 2017, according to federal investigators.
  • From 2017 to 2019, the volume may have increased to $19 billion.


Several states, like California, Texas and Delaware, have required MCA lenders to register with the state and give borrowers clearer disclosures of terms. In 2023, the Consumer Financial Protection Bureau tried to require MCA lenders to collect and report data about small-business borrowers, but the agency revised those lending rules in November to exclude MCAs.

Companies that generate inconsistent sales revenue during different seasons or periods may find merchant cash advances to be a significant burden.”

Joe Braier

CEO/President, Lake Country Advisors

Although MCAs can sound appealing when you’re in a quick pinch, the long-term ramifications can be a nightmare for branded merch firms. “There is little certainty in what the amount of debt to be serviced will be each month, which can create unpredictability for companies when trying to plan for debt service repayments,” Braier says.

“Companies that generate inconsistent sales revenue during different seasons or periods may find merchant cash advances to be a significant burden for them and would benefit from seeking other alternative financing alternatives with more predictable and manageable repayment terms for long-term stability and growth.”