Michael Hoffmann

Alternative business funding can be a lifeline for small businesses needing quick capital, but it is also a landscape filled with predatory actors. A merchant cash advance (MCA) isn’t inherently good or bad—it’s a financial tool. What does make the experience good or bad is the broker standing between the business owner and the capital. A bad MCA broker doesn’t just cost you money; they cost you options, time, and sometimes the business itself. Knowing how to spot one early is the difference between using an MCA strategically and trapping your business in a cycle of debt that is nearly impossible to escape.

The first hallmark of a bad MCA broker is commission-first behavior. If every conversation immediately turns into “how fast can we fund this?” instead of “why do you need the money?” that’s a red flag. Bad brokers don’t ask about margins, seasonality, or cash-flow timing. They don’t care whether the advance actually solves the problem—you’re just a transaction. When a broker avoids tough questions or pushes urgency without analysis, they’re selling their commission, not helping your business.

Another major red flag is the use of high-pressure sales tactics and artificial urgency. Bad brokers often rely on a “sign now or lose the deal” mentality, frequently pushing documents through electronic platforms like DocuSign without giving you time to read the fine print. They may also promise that they can “refinance” you into a better rate in a few months—a claim that is almost always a lie designed to get you to sign an expensive initial contract. If you feel rushed or find the broker dismissive of your request to have a lawyer or accountant review the paperwork, it is time to walk away.

Another warning sign is lack of transparency regarding the total cost of capital. Reputable brokers will clearly explain factor rates, total payback, daily or weekly draws, and what happens if your revenue dips. A bad broker will say things like “don’t worry about the math” or “everyone does it this way.” A good broker wants you to understand exactly what you’re signing; a bad one benefits from confusion. If you can’t clearly explain the deal to a partner or accountant after the call, the broker failed—or worse, succeeded at hiding the truth.

Lack of transparency regarding the total cost of capital is another sign of of a bad broker. Professionals have no problem explaining factor rates, holdback percentages, and the total repayment amount. In contrast, a predatory broker will focus solely on the “daily payment” or how much cash you get today. If a broker avoids direct questions about fees—such as origination, underwriting, or ACH program fees—they are likely hiding the true cost of the deal to secure their commission.

Bad brokers also encourage stacking or repeat advances too quickly. Instead of helping you exit the MCA cleanly, they pitch a second or third deal as a solution to the first one. This is how businesses spiral. Stacking increases daily withdrawals, tightens cash flow, and dramatically raises the risk of default. A broker who treats refinancing as a growth strategy rather than a last resort is prioritizing short-term commissions over your long-term survival.

Furthermore, if a broker suggests that you “tweak” your bank statements or omit existing debt on your application to get approved, they may be leading you into a legal minefield. A broker who is willing to lie to a funder will have no problem lying to you. Their primary goal is the payout, not your business’s sustainability.

The best way to avoid a bad MCA broker is simple: pay attention to behavior, not promises. A good broker will slow the process down, explain the downsides, and even tell you when an MCA is the wrong move. They’ll talk about exit strategies before you sign and outcomes instead of funding speed. If a broker is evasive or allergic to details, walk away.

In the MCA world, the deal is temporary—but the consequences of a bad broker can be permanent. Recognizing these red flags early is the only way to protect your cash flow and your company’s future.