AmiSight 11/11: When Easy Money Destroys a Business
A family-owned trucking company with nearly 50 years of history, $10 million in annual revenue, and 60 employees is now out of business. One of its merchant cash advances carried an estimated annual interest rate of 2,190%.
A disturbing Wall Street Journal article tells the story of Triways, a California trucking company that turned to merchant cash advances (MCAs) to manage cash flow and pursue a growth opportunity.
Over roughly two and a half years, the company took more than 30 advances, often borrowing more money just to repay previous advances. Eventually, the daily withdrawals consumed so much cash that the company couldn't keep up with its obligations. It closed in September.
Too many business owners come to us at MultiFunding with a version of this story.
These products aren't always wrong. Sometimes expensive, short-term financing can solve a temporary problem when there's a clear and reliable source of repayment.
But when business owners start borrowing to make payments on previous borrowing, they're entering a dangerous cycle.
The question isn't how quickly you can get the money. It's whether your business can survive paying it back.
It's heartbreaking to see decades of hard work disappear because of financing decisions made under pressure.
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