The Truth About MCA Commissions and How They Impact Your Repayment

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Merchant Cash Advances (MCAs) have become a popular form of alternative funding for small businesses, offering quick access to capital without the lengthy approval process of traditional loans. However, beneath the surface of fast cash lies a web of fees and commissions that can drastically inflate the cost of borrowing. One of the most overlooked aspects of MCAs is the MCA commissions, which can significantly affect how much a business actually repays over time.

Understanding the Role of MCA Commissions

When a business agrees to an MCA, they are essentially selling a portion of their future receivables to a funder in exchange for an upfront cash payment. While this may sound straightforward, the actual terms are often more complex. In many cases, brokers or agents are involved in facilitating the transaction, and they receive commissions from the funder. These commissions are typically built into the total cost of the advance, increasing the repayment burden on the merchant.

Unlike traditional loan interest, MCA commissions are often undisclosed or buried within contract terms. Business owners might believe they’re only paying back a fixed percentage of their sales, only to discover hidden fees or inflated rates once repayments begin.

The Snowball Effect on Repayments

MCA repayment structures are usually set as daily or weekly withdrawals from a business’s revenue. Since these payments are automatic and consistent, the actual burden can quickly snowball—especially if commissions were high from the start.

For example, a merchant may receive $50,000 in cash but be required to repay $65,000, not realizing that $10,000 of that total includes a commission to a broker. This not only inflates the effective cost of the advance but also stretches repayment timelines and drains business cash flow.

Worse, if a merchant takes out multiple MCAs to cover prior obligations—a practice known as “stacking”—the impact of commissions multiplies. Businesses find themselves in a cycle of borrowing just to stay afloat, a trap that’s difficult to escape without legal help.

How MCA Commissions Affect Your Business Credit

Another critical factor is how commissions and inflated costs influence mca credit standing. Although MCAs don’t typically report to consumer credit bureaus, they can impact business credit scores if a default occurs and the funder takes legal action. A high commission reduces a merchant’s profit margin, making it harder to keep up with payments. This financial strain can lead to missed payments, lawsuits, or judgments—all of which damage a company’s reputation and financial credibility.

Moreover, when a business shows repeated patterns of cash flow distress due to ongoing MCA repayments, it may be flagged by lenders as high risk. This reduces future borrowing options and increases dependence on further high-cost advances.

Red Flags to Watch for in MCA Agreements

Business owners should remain cautious when reviewing MCA agreements. Key red flags include:

  • Vague or missing disclosure of total repayment amount.
  • Complex terminology meant to disguise the true cost.
  • High factor rates (typically above 1.3), which often include broker commissions.
  • Pressure to sign quickly or without legal review.

Understanding where the money is going—and who is getting paid—can make a significant difference in deciding whether an MCA is right for your business.

Final Thoughts: Protecting Your Business from Unfair MCA Terms

Getting caught in an MCA with hidden commissions and unrealistic repayment expectations can derail even the most stable business. That’s why legal guidance is essential. Grant Phillips Law specializes in defending businesses against the predatory tactics of MCA funders. From contract reviews and litigation defense to negotiating settlements and vacating judgments, the firm helps businesses regain financial control and protect their future.

If you’re struggling under the weight of an MCA or suspect you’ve been misled by hidden commissions, it’s time to seek experienced legal support.

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