I was recently interviewed for a Wall Street Journal article on merchant cash advances (MCAs). I wasn’t quoted, but I gave the writers background on what we see every day at Newpoint Advisors Corporation. I mention it only because this topic matters a great deal to me, and the article made me step back and look at the bigger picture.
You can read the full article here: https://www.wsj.com/business/entrepreneurship/business-finance-merchant-cash-advance-37d8bc42
The Story We Usually Tell
When I write about MCAs, I usually tell it one business at a time. A company hits a cash crunch. The owner takes an advance to get through it. Then comes a second advance to cover the first, then a third, and before long the business is handing over a large share of its daily receipts to several funders at once. The company breaks, and an entrepreneur who started with real promise is left with nothing.
Colleagues and I often compare notes on stacking. “How high did this one go?” has become a regular question, because the number of positions keeps climbing.
Those stories are real, and they are painful. But the WSJ article reminded me that focusing on individual cases can hide what is happening across the whole economy.
How the Gap Opened
About 15 years ago, government policy pushed commercial lenders away from smaller loans. Banks pulled back from the very businesses that need capital most: young companies, owner-operated companies, and companies going through a rough patch.
The MCA industry stepped in to fill that gap. Fast money, few questions, and terms that many owners don’t fully understand until it’s too late.
When Legitimate Help Walks Away
Years later, the SBA made its position clear: if you are caught in an MCA situation, it can’t help you. Other sources of legitimate entrepreneurial finance followed the same path and found ways to screen out any business with MCA exposure.
I understand why. Those are smart self-preservation decisions, given how MCA funders operate. No responsible lender wants to stand behind a stack of daily debits it can’t control.
The result, though, is that an owner who takes one advance can find that every respectable door has quietly closed behind them.
A Problem Dressed Up as a Solution
At the same time, more MCA-oriented companies are working to present themselves as legitimate. They join trade groups and show up at industry events as if they are part of the solution. Some may mean well, but the structure of the product hasn’t changed, and neither has the damage it does when it is stacked.
The Ring of Fire Is Growing
Put these pieces together and you can see a ring of fire forming around entrepreneurship. Every year, more legitimate financing disappears from the ecosystem, and what’s left in its place is more expensive, faster-moving, and harder to escape.
This isn’t just a risk to one business at a time. When the companies that should be growing, hiring, and innovating are cut off from healthy capital, the damage spreads. It can lead to a different kind of collapse, one that unfolds slowly across the entire small business economy rather than in a single headline.
Protecting the Engine of Growth
Small and lower middle market businesses are the engine that drives growth in the U.S. economy. Treating MCA fallout as a series of isolated failures won’t protect that engine. We need a more focused, market-wide response that includes:
- Better education for business owners before they sign, so they understand the true cost and terms of an advance.
- Earlier involvement from advisors, accountants, and attorneys who can spot warning signs before stacking begins.
- Real pathways back for businesses that have taken MCAs, rather than automatic disqualification from legitimate financing.
- Continued attention from lawmakers, regulators, and industry groups to the gap that created this market in the first place.
Let’s Put Out the Fire Together
At Newpoint, we work with businesses caught in MCA cycles every day, and we’ve seen that recovery is possible when the right help arrives early. But no single firm can solve a problem this big.
I’m asking everyone who cares about entrepreneurship, including lenders, advisors, policymakers, and business owners themselves, to keep uniting around this. The MCA ring of fire is burning through our economy, and together we have the opportunity to put it out.
If your business, or a client’s business, is struggling under MCA obligations, reach out. The sooner we talk, the more options there are.