Merchant Cash Advances (MCAs) offer quick funding, but they can also be a trap when scams are involved. MCA scams often rely on aggressive, deceptive tactics to push small business owners into high-cost advances with endless fees. Here’s what to look out for and how to protect your business.
1. Aggressive Sales Tactics
MCA scammers use relentless calls and emails, creating urgency and pressuring you to act quickly. This “limited time” or “exclusive offer” tactic aims to rush you into signing without enough time to understand the full cost or long-term impact.
2. Excessive Professional and Broker Fees
Hidden or inflated fees are another red flag. Many MCA providers and brokers charge high service or broker fees, which significantly reduce the cash you actually receive. Some of these fees aren’t transparent, making the MCA more expensive than it initially appears.
3. Empty Promises of Additional Funding
Promises of future credit lines or more funding are common hooks. Scammers entice you by suggesting they’ll approve you for larger funding later, once you’ve repaid your initial advance. However, these promises often vanish, leaving you with high debt but no further support.
4. Bait and Switch
Bait-and-switch tactics are another red flag. Scammers might offer attractive terms initially but change them once you’re ready to sign, introducing higher fees, different rates, or unfavorable terms in the final agreement.
5. Research Before You Commit
Before you sign an MCA agreement, research the provider thoroughly. Look for reviews, check their reputation, and ensure you fully understand the terms. If an MCA sounds too good to be true, it probably is. Consulting a financial advisor or legal expert can help you weigh the benefits and spot red flags.
Understanding these tactics can help you protect your business from MCA scams. Always review agreements carefully and don’t hesitate to walk away if something feels off. Taking the time to research can save your business from unnecessary debt and stress.