I am comparing an MCA offer to slower financing options. The broker keeps saying it is flexible because it is based on revenue, but the payment schedule looks aggressive. I do need capital, but I do not want to sign something that forces me into another advance in a month. What are the warning signs before I sign?
Look at the payment burden more than the funding amount. Warning signs include daily payments that leave no margin cushion, factor-rate pricing you cannot translate into dollars, pressure to sign immediately, broad UCC language, a personal guarantee, confession of judgment language, stacking restrictions, and harsh default triggers. Ask what happens if sales drop for two weeks. If the answer is default, legal pressure, or taking another advance, the product is not flexible. Real working capital should give the business more operating room, not require perfect revenue just to survive.