The Term Loan MCA Trap

The MCA Trap: How Lenders and Brokers Push Merchants Into a Cycle of Debt

For many small business owners, securing financing is a necessary step to fuel growth, expand operations, or simply manage cash flow. Unfortunately, some lenders and brokers take advantage of this need, leading merchants into a predatory cycle of high-interest debt that becomes nearly impossible to escape.

The False Promise of a Term Loan

Many merchants approach brokers in search of a traditional *term loan* or an*SBA loan, expecting a structured repayment plan with reasonable interest rates. However, unscrupulous brokers often mislead business owners by claiming that before they can qualify for a term loan, they must first take out a**Merchant Cash Advance (MCA)*—a short-term, high-interest financial product that is rarely a stepping stone to a real loan.

The 30-Day Bait-and-Switch

Once the merchant takes out an MCA, they are promised that after 30 days, they will qualify for the term loan they originally sought. However, when that period ends, the broker delivers bad news: *the merchant doesn’t qualify just yet—but there’s another option.* The broker then pushes them to take out an additional high-interest MCA, claiming that it will “help their approval chances” for the term loan.

The Debt Spiral Begins

At this point, the merchant is already making large daily or weekly payments on the first MCA. The second MCA adds another layer of financial strain. Soon, they find themselves needing even more short-term funding just to keep up with the rising costs, leading them into a vicious debt cycle.

Before they know it, they are juggling multiple high-interest advances, with their cash flow being drained at an unsustainable rate. Instead of growing their business, they are forced into survival mode, prioritizing loan payments over payroll, inventory, and expansion opportunities.

The Consequences of Overextension

As business slows or unexpected expenses arise, the weight of these loans becomes unbearable. Because MCA payments are typically fixed and collected daily, they take up an increasingly high percentage of revenue. This creates a cash flow squeeze, making it difficult—if not impossible—to operate efficiently. Many businesses end up in financial distress, and some are forced to close their doors altogether.

A Way Out: Breaking Free from the MCA Trap

If you’ve found yourself caught in this cycle, there is a solution. AtClearBizDebt, we specialize in helping businesses negotiate their MCA debts, consolidating multiple payments into one manageable solution, and reducing overall debt burdens. You don’t have to keep sinking deeper—there is a path to financial relief.