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Why Merchant Cash Advance Actually Hurts Cash Flow

On the TV show “Shark Tank,” business owners typically ask for funding in exchange for equity. When a product catches the eye of Kevin “Mr. Wonderful” O’Leary, he likes to counter with a complicated deal consisting of royalties and fees. Sometimes royalty in perpetuity comes attached to the offer. Smarter entrepreneurs turn him down flat because it takes away money they could reinvest in the business.

Students Loans Are Hurting Small Businesses

Student loans can affect your life in many ways. From your credit score, to affording a car or home, and even starting a business, student loans can cripple your financial capabilities for years. While small businesses are the bread-and-butter of most communities, the lack of financial capabilities for student loan holders can damage their chances of successfully operating a business. While their business decisions may not be bad, other factors come into play when it comes to successfully operating a business.

Merchant Cash Advance: Find a Better Alternative

You’re a small-business owner in need of capital now, and a merchant cash advance looks like a good deal. Before you act, consider this: That quick cash could really cost you. MCAs have been known to carry annual percentage rates — the total cost of a loan, including all fees — in the triple digits.

California Sucks for Merchant Cash Advance

In the ’00s and early ’10s, businesses throughout California would forever make merchant cash advance companies rethink how they operate in the state. At issue was the methodology of buying future credit card receivables and how that meshed with the state’s strict lending laws.

Merchant Cash Advance Definitely NOT a Loan, New York Judge Rules

A New York Supreme Court Justice ruled that a purchase of future receivables is not a loan. And it’s not even close, according to a decision and order by The Honorable Jerome C. Murphy in Platinum Rapid Funding Group Ltd v. VIP Limousine Services, Inc. and Charles Cotton.

Court Rules MCA Arrangement Is a Loan Under New York’s Usury Laws

On October 25, 2016, the New York Supreme Court of Westchester County issued a decision in Pearl Capital Rivis Ventures, LLC v. RDN Construction, Inc. that helps clarify the circumstances under which the provision of a merchant cash advance in exchange for the assignment of future receivables may be deemed a loan subject to usury restrictions, versus a non-loan purchase and sale agreement.