Are Predatory Lenders Calling Your Business? WHEN is Predatory Money Good?

WOW - I am having a ton of conversations with business owners who are getting multiple calls a week about companies calling to try to get them borrow money.

They are calling for a couple of products. 1. MCA (Merchant Cash Advances) 2. Factoring.

Both of these have their places in the market for a company. The question is When and Under What Circumstances?

Predatory for this money is a subjective term - just because money has a high interest rate does not inherently make it predatory. If the money makes sense as a good business decision, it is not predatory. If you are borrowing this money out of desperation then I would believe it is predatory. Another words… HAVE A PLAN!

When should you use MCA or Factoring? Great Question!!!

I believe you should use it when you get an opportunity to buy a piece of equipment or inventory at an incredible price (which more than offsets the cost of the money). If that piece of equipment can speed up a job that results in profit... this is a good reason to use MCA or Factoring Money.

If the bulk inventory you buy (after the cost of the money) has a larger profit margin than normal... this is a good reason to use MCA or Factoring.

If you need quick Cash to make payroll - you have to look at WHY? Do you have the funds coming and it is a rare circumstance and you just need it this once? or is this a common occurrence because of business decisions, circumstances and cash flow crunches? These products should be used when it is the RARE occurrence because this is EXPENSIVE money that could cost more than your profit margin.

I talked to a guy last week who wanted to get 50K from an MCA to pay bills and make payroll. But he didn't have the 50K coming in receivables anytime in the near future. Doesn't feel like a smart time to borrow expensive money. Of course he didn't qualify either.

The bad part is - when you borrow predatory money and it is at a much higher interest rate than your profit margin. YOU ARE GOING IN THE HOLE!!! How long can you do that before you are out of business?

ALSO... if you are borrowing it for operating capital to survive, this is a BIG RED FLAG! Talk to a mentor, a business coach or someone you trust before using Predatory Money in a time of desperation.

SELF TEST - are you feeling desperate to get this money, or something bad will happen and you see no money coming? Don't Do It!

There are so many options out there for money call an expert and let them show you the different ways to help bring working capital to your business.