A staggering 9 out of 10 Line of Credit Depot applicants have never applied for a line of credit, but they have had or currently have a merchant cash advance (MCA). For those of you who are unfamiliar with Cash Advances, these are short term funding programs that range from 20% to 50% in cost of capital, with payback terms anywhere from 3 to 12 months. Although these products aren’t inherently bad, the cost of them is quite dangerous if there is not a real noticeable ROI (return on investment). Lines of credit are cheaper and most times unknowingly available to MCA borrowers.

If you are a business owner you probably have seen marketing emails and cold calls advertising ‘24 hr funding’, ‘any credit score’ and ‘fast funds’. These programs are designed for the funder to get quick returns based on an owner’s quick needs for cash. Just because the process for this expensive cash is ‘easy’, business owners end up paying for it with a high cost of capital and extremely high ‘origination/closing fees’.

So why do I hate merchant cash advances? Mostly because of the sales tactics involved. The intention of brokers and funders is to make as much money as possible, and commissions on MCA’s can be as high as 15% paid directly to the broker. It’s unreasonable to think that brokers would forgo trying to sell a merchant cash advance, when the business owner could qualify for a line of credit, because lines of credit don’t have commissions built in. Brokers are calling businesses non-stop, because the commissions are so high. They intend on selling the business expensive money, because their commissions are built into the cost of the MCA.

For example; let's say that a broker offers you $100,000 payback over 8 months at a 1.40 factor rate. This means that most likely the broker has included their commission cost in this payback amount of $140,000. Odds are the commission on this would be $10,000 or 10%. I’m not against these brokers making money, but I am against the notion that brokers would be selling unsuspecting businesses programs that they are overqualified for. How do you really know that your business doesn’t qualify for a better program, like a line of credit? Well, you really don’t know until you apply with Line of Credit Depot. We only sell lines of credit, so if you don’t get approved here you can be assured that your business doesn’t qualify for a line of credit, period.

I’ve seen countless times where a business applied with us, and they were sold an MCA recently before. These businesses could have initially gotten a line of credit, but when we meet them they are already locked in with paying a front loaded interest advance. Please do yourself a favor and make sure that your business applies and receives the best financial product available. To check your pre-approval amount, please apply here.