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  • Richard Gusmano

Has your Loan Broker explained how expensive MCA Renewals are?

Updated: Jan 6

Imagine this typical ‘funding’ scenario:


Your growing business takes a 20K advance at about 35% factor rate - so you're due to pay back 27K over the predetermined time period- let’s say 100 business days - paying $270 a day.


Once you've paid back 50 days (halfway), the ‘Funder’ reaches out to you mentions that you are ‘approved for a renewal.’ Your initial reaction is that you are pleased that someone appreciates your stellar payment record and is willing to fund you more $. Tread VERY carefully here as your businesses cash flow depends on how you approach this.


The funder has received $13,500 of their initial investment from you - and is now offering to fund $30k - at the same 35% factor rate. What they do is pay themselves the balance ($13,500) and give you $16,500. NOW you are contractually obliged to pay them back $40,500!!!


That’s right. You get $16,500 and they get 40,500- when you’ve already paid them $13,500.


If you agree to these terms you are agreeing to receive $36,500 (the original 20k + 16,500 net on renewal) and paying back $54,000 over 150 business days- or a little more than 7 months. If we were to do an actual Annual Percentage Rate Conversion on this proposed transaction (instead of factor rate) the APR would exceed 400%.


At BCC we take the time to understand our clients- and understand what they are eligible for- and explain why.


Let us help your Business achieve new heights by helping you KNOW BEFORE YOU BORROW

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