Merchant Cash Advance Scams and the Red Flags to Check
The common merchant cash advance scams are upfront broker fees, fake funders on cloned websites, reverse consolidations sold as payoffs, and contracts that change at signing.
What each scheme looks like, how to test an offer in ten minutes, and where to report one.
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Five schemes to know
- The advance-fee broker. Asks for an underwriting, processing or guarantee fee before you see an offer, then goes quiet. Legitimate brokers don't charge you before your deal funds.
- The cloned funder. Copies a real funder's name and logo onto a lookalike website, sends the contract from a free email address and wants the payment or your bank login sent somewhere unusual.
- The payoff that isn't. Pitched as paying off your advances, it's really a reverse consolidation: a new debit is added while the old ones keep running. A real payoff comes with payoff letters and the old debits stop.
- Bait and switch. The offer quotes one payment or factor rate; the contract shows another, or fees appear that cut the cash you receive.
- Reconciliation in name only. The contract says payments follow your sales, but requests to adjust them go unanswered while fixed debits continue. Before you sign, read the reconciliation clause for who starts an adjustment, how frequently it can happen and which statements the funder wants to see.
A ten-minute test before you sign
- The legal name on the contract matches the company you spoke with, and it shows up in the state business registry where it says it's based.
- Total payback equals the amount funded times the factor rate, and any fee taken out of the funding is listed in dollars.
- Nobody has asked you for money before funding.
- For a consolidation, each old advance has a payoff letter and an amount being paid.
- You know whether the contract includes a confession of judgment, which lets a funder get a court judgment without a lawsuit. New York no longer accepts them from businesses outside the state, but some contracts still include one; have an attorney read it.
- A quick search of the funder's name plus "lawsuit" or "attorney general" turns up nothing serious.
The MCA cost checker confirms the payback math, and how to read an MCA offer covers each line of the contract.
Regulators have taken notice
The Federal Trade Commission and state attorneys general, including New York's, have sued merchant cash advance companies over hidden fees, withdrawals beyond what contracts allowed and threatening collection tactics. California's financial regulator, the DFPI, also bars unfair, deceptive or abusive practices in commercial financing and takes complaints from small businesses. A growing number of states also require funders to show the cost of an offer in writing before you sign; the state availability page lists them.
If it already happened
Stop sending money, save every message and document, and call your bank right away about any payment you want to recall or dispute. What to do if you were scammed by an MCA broker lays out the steps in order, including where to report it.
What else do owners ask?
What are common merchant cash advance scams?
Upfront fees, fake funders on cloned websites, reverse consolidations sold as payoffs, and contracts that change at signing.
What should you read next?
Questions owners ask about this
Are merchant cash advances a scam?
No, but scams exist around them. Check the red flags on this page.
Is it normal to pay a broker fee upfront?
No. Afterfirst never charges owners.
How do I check a funder is real?
Confirm the company's legal name, address and phone number, and match them against the contract.
How do I report an MCA scam?
Your state attorney general and the FTC take complaints.
What if I already signed?
Keep every document and talk to a business attorney.
Scam questions
Are merchant cash advances a scam?
No. An advance is a legal financing product across the U.S., and many businesses use one well. It's expensive and more lightly regulated than a bank loan, which leaves room for bad actors. Check the people and the contract, not just the product.
Is it normal to pay a broker fee upfront?
No. Most brokers are paid by the funder when a deal funds; Afterfirst is paid that way too, plus a monthly funder membership. A fee requested before you see an offer is the most common sign of an advance-fee scheme. Here is how we're paid.
How do I report a merchant cash advance scam?
File with the FTC at ReportFraud.ftc.gov and with your state attorney general or financial regulator; in California, that's the Department of Financial Protection and Innovation. If money moved by card, ACH or wire, call your bank right away about a dispute or recall. Keep every contract, email and text.
What is a confession of judgment in an MCA contract?
A clause in which you agree in advance that the funder can get a court judgment without a lawsuit if it claims a default. New York no longer accepts them from businesses outside the state, and some other states limit them. If your contract has one, have an attorney read it before you sign.
Want a second look at an offer?
One free application, read by a person. You see every offer side by side and choose one or none.
Broker, not a funder. info@afterfirstmca.com.
What happens after you apply
Apply
Send one free application online or by phone. A person on our team reads it before any funder sees it.
Review
We call you, to fill gaps and confirm bank statements.
Offers compared
We shop your file with funders that fit and show every offer side by side: payback, payment, and term.
You choose
Pick an offer or walk away. Nothing is final until you sign the funder's contract.
Funding
Once you sign, the funder sends the money straight to your business bank account.
Before you sign with anyone, these pages help you check the offer itself: how to vet an MCA company, identifying the funder on your offer and what a confession of judgment means.
Send one file.
See what fits.
Check us first: call, ask questions, then decide. Owners never pay us. Applying won't affect your credit.