The Sad & Expensive Truth about Merchant Cash Advance (MCA) Loan Rates

Posted by on September 19, 2016 in MCA/ACH | Comments Off on The Sad & Expensive Truth about Merchant Cash Advance (MCA) Loan Rates

1.3 rate factor? Notarized COJ? What do these terms even mean? And more importantly, what is the real cost to you of a Merchant Cash Advance or MCA Business Loan? MCA loans are seen as bad credit business loans and are typically 4 to 10 times more expensive than Invoice Factoring with none of the protection. The MCA ACH Loan Rule of Thumb says, whatever the MCA Rate Factor dollar amount is over the payback period, your net profit should be more. If not, at the end of that period you will be that much closer to bankruptcy. For example, if the ACH loan cost is $30k and you are paying it back in 3 months and your net profits are less than $30k in those 3 months – DON’T DO IT! Also, a merchant cash advance loan is a one-time event. You get $100,000 once, and then you hemorrhage cash via daily ACH payments from your bank account until it is paid off. With Paragon, you are rewarded for growth. The more sales you generate, the more working capital you receive based on your increased client billings. We have clients who grew from $50,000 to $1,000,0000 in sales per month and Paragon was with them for their entire successful journey with unlimited working capital and credit protection. The only plus of an expensive ACH loan is you get your money a few days faster than from a reliable invoice factoring company like Paragon. However, the hidden negatives are so onerous that they could kill your company. Example Rates & Fees: MCA/ACH Loan vs Factoring $100,000 from a Merchant Cash Advance lender MCA Rate Factor 1.6 $160,000 $160,000 $160,000 1.5 $150,000 $150,000 $150,000 1.4 $140,000 $140,000 $140,000 1.3 $130,000 $130,000 $130,000 Months 3 months 6 months 9 months # of Daily Payments 63 126 189 Daily Payment Amount 1.6 $2,539 $1,269 $846 1.5 $2,380 $1,190 $793 1.4 $2,222 $1,111 $740 1.3 $2,063 $1,031 $687 MCA Loan APR! 1.6 423% 212% 142% 1.5 359% 181% 121% 1.4 294% 148% 99% 1.3 226% 114% 76%   Hypothetical $100,000 from Paragon Financial Factoring $125,000/month with a 80% advance @ 1.5%/30 days Monthly Factored Invoices $125,000 80% Advance $100,000 3 Months of Factoring Cost ($5,625) versus 3 Month MCA Fees  ($40,000)  Paragon Factoring Savings  $34,375! Invoice Factoring from Paragon typically includes the additional value-added services of Credit Protection & AR Management, which means you receive even additional superior value versus any ACH/MCA/marketplace loan. You get so much more than just working capital from a good factoring company like Paragon. Our invoice factoring calculator estimates both factoring’s benefits and costs to you and allows you to compare the cost of lenders who offer fewer services and versus the killer high rates of a MCA loan. Get the Cash you need Today The Sad & Expensive Truth about Merchant Cash Advance (MCA) Loan Rates Apply Now Money When Your Business Needs It...

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What is Merchant Cash Advance Consolidation?

Posted by on March 15, 2016 in MCA/ACH | Comments Off on What is Merchant Cash Advance Consolidation?

Is a Merchant Cash Advance Consolidation the Answer to Your Business Cash Flow Issues? It starts with a small merchant cash advance, which leads to another and then another, until before you realize it, all of your business credit card sales are going towards paying off these debts. This practice of stacking merchant cash advance loans – or ACH – can quickly put your business into a downward spiral. One solution to help you get out of this cycle of business debt is with a merchant cash advance consolidation. What is a Merchant Cash Advance? A business in need of quick working capital might look at a merchant cash advance for a cash-flow solution. So long as you have a merchant account and accept credit card payments, you could qualify for this type of small business cash advance. The merchant will loan you the money you need, and then accept repayments towards that loan through your credit card sales, virtually guaranteeing that you do not default. Of course, there will be interest and other fees deducted as well, but all of this will be bundled together into your payment plan. Some businesses in dire need of working capital may commit to more than one of these types of business cash advance loans. This practice is known as stacking, and can cause the business to have to make daily repayments that they really cannot afford. In essence, the inflow of money can come to a near standstill if the business is one that relies heavily on credit card revenue to survive. The Benefit of Merchant Cash Advance Consolidation Merchant lenders like this type of business cash advance because the repayment is practically guaranteed through the business’ sales. If you were to consolidate these debts into one, the lender is still going to get their money back (and the fees they charged you) but the terms will be adjusted so that you are still able to collect on your daily sales receipts and keep a flow of cash running to your business. What is a Business Debt Consolidation Loan? A debt consolidation loan for a business is not much different from one used for personal financial difficulties. You apply for a specialized lending product that details the extent of your business debt. Once approved for the loan, the new lender will pay off the existing merchant cash advance debts, essentially leaving you with only one payment to make, where before you had multiple. In most cases, even after interest rates and other fees are calculated, you will have more cash left over each month to work with. Moreover, when looked at over the long term, you will find that by consolidating those merchant cash advances, you have saved your business thousands of dollars. The terms of a merchant cash advance include deducting a certain percentage of your money every day from your credit card sales. This can put you in a position of not earning enough to keep up with your expenses, especially once you have more than one of these types of cash advance. With a straightforward merchant cash advance consolidation, terms can be chosen that will still allow your business to move forward with enough working capital. How Would Your Business Qualify for a Merchant Cash Advance Consolidation? A reputable business lender would look at your business credit score, but they will also be interested in the amount of revenue your business is making, and how the merchant cash advances are adversely affecting your cash flow. They will then try and work with you to construct a repayment plan...

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08/28/2014 – Paragon Financial Group Publishes Article Showing Warning Signs of a Merchant Cash Advance Market Bubble

Posted by on August 28, 2014 in | 0 comments

FOR IMMEDIATE RELEASE Paragon Financial Group, Inc. publishes article discussing the warning signs of a merchant cash advance market bubble. The article looks at the lack of access to small business loans and how merchant cash advance (MCA) lenders have stepped in to fill the demand. It continues to discuss the high growth in the MCA industry and dangers of MCA’s high interest rates of 60%. As stated in the article, “With the limited funding options available for U.S. small businessthere is an increased number of entrepreneurs using MCA’s for more than just a short-term cash crunch. Very similar to payday loans for consumers, this type of loan does not solve long-term cash-flow solutions,” said Chris Curtin, Paragon Financial Group EVP. “MCA’s high-risk financing has a much higher default rate than non-bank financing. A large number of defaults would make a negative impact on MCA’s availability. Investors will no longer see MCA’s as being viable,” said Curtin. “Companies that became reliant on these loans have the potential to default in mass. This type of pattern is very similar to what happened in the sub-prime mortgage industry bust.” Read the article here https://www.paragonfinancial.net/how-it-works/articles-resources/industry-factoring-articles/paragon-financial-group-seeing-warning-signs-of-a-merchant-cash-advance-market-bubble About Paragon Financial Group For 20 years, US companies across all industries have been choosing Paragon Financial to meet their working capital needs. From government contractors to distribution companies, from staffing firms to manufacturers, business owners have successfully grown their companies with Paragon Financial’s invoice factoring, AR management, credit protection and purchase order financing programs. To get funded now, please call 888-271-9347 or...

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Warning Signs of a Merchant Cash Advance Market Bubble

Posted by on August 18, 2014 in | 0 comments

Paragon Financial Group, Inc. is seeing the warning signs of a merchant cash advance market bubble. Small business bank loans have dried up and are more difficult to obtain since the Great Recession of 2008. Merchant cash advance (MCA) lenders have stepped in to fill the demand and are entering the market place at a high rate. David Rubin, CEO of Capital Stack LLC, says a little over a year ago there were 50 MCA funders with $1.5 billion in funding and just a year later over 120 funders with 3 billion in volume. The market for these types of loans are approaching 5 billion within the next several years according to The Green Sheet. “With the limited funding options available for U.S. small business there is an increased number of entrepreneurs using MCA’s for more than just a short-term cash crunch. Very similar to payday loans for consumers, this type of loan does not solve long-term cash-flow solutions,” said Chris Curtin, Paragon Financial Group EVP. A big reason is the hefty price being paid. According to Marc Prosser of fitsmallbusiness.com, entrepreneurs are paying equivalent interest rates from 60% by the time a MCA is paid off. Small businesses can get trapped relying on these loans. “It’s the only way that I’ve found of getting funds that I need,” said Tony Boulton, owner of a kitchen supply store. “The sooner I can get out of it, the better. But right now it’s the only option I have.” At the same time, lenders are not mitigating risk and are focusing on quantity vs the quality of the borrower with practices such as stacking(the practice of obtaining multiple merchant cash advances from multiple companies at the same time), according to DailyFunder.com. “MCA’s high-risk financing has a much higher default rates than non-bank financing. A large number of defaults would make a negative impact on MCA’s availability. Investors will no longer see MCA’s as being viable,” said Curtin. “Companies that became reliant on these loans have the potential to default in mass. This type of pattern is very similar to what happened in the sub-prime mortgage industry bust.” For more information on Paragon’s alternative small business funding programs to MCA’s, contact Chris Curtin, National Sales Manager via email or call Chris at 888-271-9347 ext...

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Is a Merchant Cash Advance Bubble Coming?

Posted by on July 21, 2014 in For Brokers | Comments Off on Is a Merchant Cash Advance Bubble Coming?

We all know small business bank loans have dried up and are extremely difficult to obtain since the Great Recession of 2008.  Small business has become increasingly desperate to find short-term cash-flow solutions. Because of their ease of obtaining and loose credit requirements, Merchant Cash Advance (MCA) & ACH lenders have stepped in and filled the demand.   These types of loans have been very profitable for the lenders. Wall Street has funneled billions of dollars into the products because of high yields in a low yield environment. As a result, new merchant cash advance lenders are cropping up almost on a daily basis saturating the marketing place.  Many of these lenders are not profitable and loans losses are huge. A word of warning for brokers. You might be making a commission now, but very soon you may be seeing your own cash flow evaporate as quickly as it came. With the limited funding options available for U.S. small business we are seeing an increased number of entrepreneurs using MCA’s for more than just a short-term cash crunch.  Very similar to payday loans for consumers, this type of loan does not solve long-term cash-flow solutions.  A big reason is the hefty price being paid. Entrepreneurs are paying around 60-150% by the time an MCA is paid off! Small businesses are trapped relying on these loans. At the same time, lenders are not mitigating risk and are focusing on quantity vs the quality of the borrower.  With the increased lending to risky borrowers we are starting to see an increase in defaults. As defaults start to become more prevalent a dramatic decline of MCA’s availability will occur.  Investors will no longer see MCA’s as being viable.  Companies that became reliant on these loans will default in mass and the cycle of collapse will be complete. This type of bust will be very similar to what happened in the sub-prime mortgage industry. To make matters worse for MCA resellers, many lenders require brokers take partial liability on loans they arrange. This makes the pending bubble particularly painful for brokers.  The good news for MCA resellers and brokers is there are profitable, less risky long-term lending solutions for small business. Factoring companies such as Paragon Financial have a two-decade long presence in small business funding working to cultivate, educate and support their brokers.    Paragon offers brokers long-term financial security. MCA lenders are creating a potential disaster for you as a broker. Paragon Financial’s broker program gives you options MCA’s do not offer. We offer credit protection with every factoring program, we can fund companies with tax issues, client concentration issues and select startups. Paragon knows how to mitigate risk and we are in this long-term. Diversify out of the merchant cash advance business now before it’s too late. For more information on our broker program visit https://www.paragonfinancial.net/for-brokers. To discuss funding options that work for you, please contact our National Sales Manager, Chris Curtin via email or toll-free at 888-400-5931 ext 1. Money When Your Business Needs It...

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