So, the business loan companies are advertising lower rates and trainings that their product is superior and is cheaper than merchant advances. In order to see if this is the case, we grabbed a recent contract from a customer who borrowed $100,000 from a business loan company- one of the larger ones who market to ISOs often.

The Loan of $100,000: The interest rate over 12 months was $19,118.87 so essentially a 1.19/12. However, let's discuss the FEES that were on contract that a customer had to pay as well:

1- Origination Fee: $2,500
2- Platform Fee: $4,000
3- LOAN GUARANTY FEE: $12,110.13 (is this an upsell verbiage on contracts for brokers commission??)
4- Loan Servicing Fee: $771

TOTAL INTEREST PLUS FEES: $36,000 to borrow $100,000 over 12 months. Essentially, a 1.36/12.

Now, with buy rates and premium rates and rates in general being lowered at most mid to large mca companies for better paper, this same merchant could have borrowed $100,000 at a 1.29/12 to 1.32/12 for example- So, $29,000-$32,000 max fees for $100,000.

Doesnt look like the stories being told to public that these loans are CHEAPER to merchants. Because these loans are adding UPSELLS to brokers, most brokers are upselling merchants up to 12-13 points above rates and in turn, the effective costs are MORE than a MCA!

THE ONLY BENEFIT for a loan in above example is IF they wanted a fixed daily payment- That was it- They accept cc sales to warrant a $100K or more advance-

Ask the questions folks- these loans are not cheap when you add the interest, fees, plus UPSELLS by brokers.....