A merchant cash advance (MCA) can provide quick access to capital for a small or medium-sized business. However, a business owner who takes out an MCA may find it difficult to keep up with payments and face financial distress.
If you are a business owner, are you aware of the signs of MCA-related financial distress? In addition, what steps can you take to protect your business?
4 signs of financial distress in a business
As a business owner who has taken out MCA loans, you may experience financial distress due to fees associated with these advances. The following signs can show that your business may be in trouble:
- Excessive repayment amounts: This can be a sign that the MCA terms are too harsh, with repayment amounts that are disproportionately high compared to your business’s income.
- Cash flow problems: Your business may experience cash flow problems due to the high repayment terms.
- Huge withdrawals from daily sales: This can leave your business with little to no remaining balance.
- Inability to pay other expenses: When MCA repayments become too burdensome, your business may struggle to pay rent, utilities or supplier invoices.
If you are experiencing any of these signs, you may need to reassess your financial situation and seek help. The consequences of ignoring these signs can be severe and long-lasting. Among the consequences are the loss of business assets and even business closure.
Managing the complexities of MCAs
Recognizing the signs of MCA-related financial distress is crucial for you as a business owner who wants to avoid serious consequences. By seeking legal counsel, you may receive the assistance and support you need for managing the complexities of MCA-related debt. Additionally, having legal guidance may help you protect your interests and rights as you navigate the MCA landscape.