If you're considering an MCA, read every clause carefully. These are the seven that cause the most damage, in order of severity.
1. Confession of Judgment
A clause where you agree that, if you stop paying, the lender can obtain a judgment against you without going to court. It's legal in some states, but very high-risk for the owner. If you see it, walk away.
2. Implicit stacking
You agree that the lender can sell your profile to other lenders. Within 48 hours you can have 5 stacked MCAs suffocating your cash flow.
3. Daily ACH debit with full draw
If the clause allows the lender to debit your full account balance without notice, don't sign. You need control over your account.
4. Advance broker fees charged to the business
A legitimate broker doesn't charge you upfront. If they ask for $500–$2,000 "to process" your file, that's a scam or a predatory practice.
5. Factor rate without an equivalent APR
If they only show you the factor rate (e.g., 1.45) and refuse to calculate the equivalent APR, they're hiding the true cost from you.
6. Disproportionate personal guarantee
A personal guarantee for the loan amount is standard. A personal guarantee of $500,000 when the loan is $75,000 is not.
7. No right to prepay without penalty
A fair loan lets you pay early and save on interest. If you're penalized for paying early, the lender isn't aligned with your interest.
Versatil only works with lenders that reject Confession of Judgment clauses, implicit stacking, and factor rates without an equivalent APR. It's a non-negotiable line for our network.
Ready for an honest conversation about capital for your business?