MCA DEBT: Riding The Dragon
We live in a country where the rules are made by those who can pay to play. And that is the way THEY want it. They like the rules – no THEY insist on the rules because THEY can pay – you and me, we can’t – the entry fee is entirely too expensive for us. Is this condition unfair? Of course. Is it corrupt? Yes, but only enough to resist change.
So, where am I going with this? Let me give you an example. For several decades, Corporate America has perpetuated a policy of delaying payment to its vendors. Where once upon a time, typical remittance occurred within 30 days, that payment is now made closer to 60 and often 90 days.
When publicly traded corporations use stock purchase capital (at a cost of zero percent) for their operations, how much can they earn within interest bearing investments as they delay payment to the small business vendor? The answer is simple – enough to change the rules. So, Corporate America makes a little more green, you and me – we get paid in 60 to 90 days.
Very few small business operators can afford to finance their business for 90 days while awaiting payment. That is where business lenders and investors come in; they provide a capital bridge from invoice to payment, covering interim business expenses.
These investors are:
Banks
Factors - US Invoice Funding is a factor.
Financial Partners and Investors and –
(roll the organ music – a dirge in minor key)
Private Capital Lenders - MCAs
MCAs make loans to companies that have no choice – they need money RIGHT NOW.
They are out hunting for those companies; and once they spot their prey, they set a hook. AND – because their mark is so desperate, the MCA can charge outrageous fees and interest; with a payment plan that is oppressive. Don’t take the bait – it’s not the hook that hurts – IT’S THE BARB.
We’re seeing more in the news about the dangers of these MCA loans and want you to be aware. Read more about it in this New York Times article.
Let’s back up – you need funds to cover the float – your customers do not pay you for 45 – 60 days – that’s 8 payrolls. Do this –
Talk with your bank – ask for a revolving loan based on your invoices.
Talk to your CPA – ask for an alternative – maybe a financial partner.
Call us – If your financial condition can be corrected, we will find the way. And if your best alternative is someone else – we will tell you.
I’m Mike Johnston with US Invoice Funding – we are good at getting our clients headed in the right direction.
View the corresponding video to this blog post on YouTube!