What is a Merchant Cash Advance? | Apex Capital Blog

What is a Merchant Cash Advance?

by Apex Capital | June 20, 2016

Have you ever received a call from a company like this?

“We work with ABC Company. Because you’re a client of theirs, we can provide you with $8,000 of working capital immediately. All you have to do is let us take $150 per day from your bank account five times each week for 16 weeks, and we’ll be square.”

You need cash and it seems like a good deal, so what’s the harm? By taking a closer look, you’ll see that it could hurt your trucking company.

Merchant Cash Advance

Calls like this are usually from companies promoting a merchant cash advance, or MCA. While this may seem like an attractive offer, it isn’t. Over the last couple years, MCAs have been targeting small to mid-sized trucking companies looking to provide cash flow to their businesses in exchange for a percentage of their income.

What is it really?

An MCA looks like it’s a loan to your trucking company with a large lump sum upfront, but really, it’s a sale of a share of your trucking company’s future profits! Under most MCA agreements, the MCA is authorized to take its payments directly from your trucking company’s bank account on an ongoing basis.

Some MCAs try to find trucking companies who are already factoring their freight bills because they know a factoring company is keeping money in that company’s bank account.
Unsurprisingly, the default rate is high when working with an MCA. If the MCA tries to get their payment from your company’s bank account and can’t, they send a redirection letter to your factoring company or even your customers, and try to direct funds to the MCA itself, which would otherwise go to you.

Does cash flow have you stressed? Let us show you how our factoring services, fuel card program, free load board and other advantages can help you keep more money in your trucking company. Get in touch with Apex Capital today call 1-855-369-2739 or get started here.

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