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Can a Merchant Cash Advance Wreck Your Credit Score?

You’re running a business, busting your ass: when suddenly, boom, a cash-flow crunch hits. For quick capital – some turn to merchant cash advances (MCAs). But, let me ask you this: do these alternative business loans actually impact your credit?

What the Hell is a Merchant Cash Advance?

First off, let’s define our terms: a merchant cash advance isn’t a loan. Nope, it’s a lump sum of cash upfront – that you repay via a percentage of future sales.

Unlike a bank loan with set payments, MCAs are repaid through a split of your credit card sales until the advance, plus hefty fees, is paid. So, every time you ring up a sale – a portion automatically goes to the merchant cash advance company.

Credit Score Impact – The Truth

Here’s the gritty reality, merchants: a merchant cash advance won’t directly ding your personal credit score. Wait, really? Yes, because MCAs aren’t reported to consumer credit bureaus, like Experian or Equifax.

But, and it’s a big BUT, defaulting on your MCA repayments can indirectly destroy your credit standings. Allow me to explain…

Judgment Day for Unpaid MCAs

When you burn through working capital – that merchant cash advance lender can, and will, cash up by taking you to court for the unpaid balance. If they secure a judgment against you or your business – that court record is visible to any potential creditors.

So while the MCA doesn’t appear on your personal credit report – creditors may view that judgment as a delinquency, and deny you loans or credit cards. Bottom line: one messy MCA default could send your credit score into a death spiral.

See also  Connecticut Business Debt Settlement Lawyers

Liens and Frozen Bank Accounts – A Merchant’s Worst Nightmare

It gets worse, folks. Let’s say you stop paying that MCA company – they can pursue further legal action by placing liens on your business assets or even freezing your bank accounts. Yikes.

Having your cash-flow choked or assets tied up legally is a huge risk. One that could cripple operations, make it impossible to repay other debts on time, and bring creditors sniffing for weaknesses in your financial standing.

The Merchant Cash Advance Double-Edged Sword

Look, MCAs can provide emergency funds fast – without a credit check. But if you mishandle repayment, the consequences could indirectly torpedo your business and personal credit ratings.

Before signing on the dotted line, make sure you truly understand the repayment terms and have a solid plan to repay that advance on time and in full. Seek advice from a qualified financial advisor on whether an MCA is appropriate for your situation.

I’ll leave you with this: easy money today could mean credit havoc tomorrow if you don’t approach merchant cash advances with caution. The choice, as always, is yours.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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$500,000 MCA Restructured Over 3 Years
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$250,000 SBA Loan Offer in Compromise
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$350,000 MCA Restructured Over 2 Years

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