How much does your MCA Broker get paid for each advance (loan)?
How can Merchant Cash Advance (MCA) companies afford to pay such
astronomical commission rates to entice brokers to send your file to them?
The fact of the matter is: You are paying the commissions!
“…let’s say you took the $100,000 in financing and received ~$98,000 after “closing fees” and you have a payback of $150,000 within an estimated 6 month period (120 daily business day payments of $1250 or 24 weekly payments of $6250)…
…That is a “Factor Rate” of 1.50x ($150,000 payback divided by loan of $100,000). [FYI, that equates to over 100% Annual Percentage Rate (APR) on a yearly basis]…
…So assuming you make all of the payments successfully over a 6-month period. You will be paying back $150,000 after receiving $100,000 or a cost of $50,000 to borrow $100,000 for six (6) months…
…Believe it or not, that is NOT the worst part. The worst part is that your business financing broker (loan broker) will receive 1.1x to 1.15x of the amount that you receive (the “funding”) or $10,000 to $15,000 from the Merchant Cash Advance (MCA) company for selling you the MCA advance (getting you to take their financing option instead of other available options that may be longer term and less expensive)…
…When your business financing broker is presented with an “Approval” from the Merchant Cash Advance (MCA) company, your broker chooses from a list or tier of “Offers” at each Merchant Cash Advance (MCA) company. This list of offer options contains variable commission rates and payback terms and cost to the borrower. (Ex.- $100,000 in “funding” at a 1.35x factor rate or $135,000 payback). Your “trusted, friendly broker” adds from 0.10x to 0.15x to the offer and presents it to you as: $100,000 in “funding” at a 1.50x factor rate of $150,000 payback...
Your broker just added between $10,000 and $15,000 (their commission) to your cost of financing.
~20% to 25% of your cost of MCA financing (cost of capital) is a commission paid to your broker.