You needed cash. The MCA gave you cash. Now it is taking $1,500 a day and your account is tighter than before you took it. Here is the exit.
A merchant cash advance gives you a lump sum in exchange for a percentage of future revenue. You repay it daily via ACH. The factor rate — usually 1.2 to 1.5 — means a $100K advance costs $120K to $150K to repay. Annualized, that is 40–100% interest. It is not technically a loan, which means it is not subject to usury laws. And once the daily pulls start, they do not stop until the balance is zero.
The reason contractors end up here is not stupidity. It is timing. A $4M civil sub can be profitable on paper and still have $12,000 in the bank on a Tuesday because the GC pays net 75, three pay apps are outstanding, and payroll hits Friday. The MCA solves Tuesday's problem. It creates next month's problem.
The first MCA costs $1,200 a day. By month two, cash is tighter than before you took it — because the daily pull is extracting more than the advance improved your position. So you take a second MCA to cover the gap. Now you are paying $2,400 a day.
Roughly one in three contractors who take an MCA ends up stacking a second one within 90 days. The underlying problem — cash flow timing — was never fixed. Only the symptom was treated.
| Advance Amount | Factor Rate | Total Repayment | Daily Pull (6 mo) | True Annual Rate |
|---|---|---|---|---|
| $50,000 | 1.3x | $65,000 | ~$542/day | ~60% |
| $100,000 | 1.3x | $130,000 | ~$1,083/day | ~60% |
| $150,000 | 1.4x | $210,000 | ~$1,750/day | ~80% |
| $200,000 | 1.5x | $300,000 | ~$2,500/day | ~100% |
Daily pull calculated on 120-day repayment period. True annual rate varies based on actual repayment timeline.
You have billed the work. The GC owes you the money. You just have not collected it. The average contractor who comes to SPM with MCA debt has $80,000–$300,000 in AR sitting for 45–90+ days. That is money already earned. The MCA gave you $100K at 60% annualized when the real fix was collecting what you were already owed.
Most contractors who end up in MCAs have been systematically underpricing their work for years. They think overhead is 8%. It is actually 14%. Every job bids at a margin that looks profitable and delivers one that is not. A slow month creates a hole that a bank will not fill but an MCA will.
Work starts. Crews mobilize. Materials get ordered. Then you wait 30 days to submit Pay App 1, 15 days for approval, and another 30 days to get paid. You are 75 days in before a dollar comes in. Meanwhile payroll runs every two weeks. The MCA fills the gap — and pulls cash daily during it, making the next cycle worse.
The exit from an MCA is almost always funded by the business itself — not by new financing. The money is usually already there in uncollected AR, overbillings not yet collected, or retainage sitting past release. The goal is to generate enough cash from existing assets to pay down or settle the MCA balance, then rebuild the billing system so it never happens again.
Pull every invoice outstanding more than 30 days. Call on every one of them this week — not a statement, an actual call. Most contractors have $50,000–$200,000 sitting in invoices nobody has followed up on. That is your first source of exit cash. It costs nothing to collect money you have already earned.
If you are running jobs and have not caught up your billings to percentage complete, you have underbilled receivables — money you have earned but have not invoiced yet. Submit corrected pay apps immediately. Every dollar you collect reduces the MCA balance and the daily drain on your account.
Many MCA lenders will accept a settlement for 70–85 cents on the dollar if you can demonstrate ability to pay a lump sum. This is not guaranteed, but it is worth a direct conversation before you pay full factor rate on a balance you could settle early.
Once you have collected the AR and reduced the MCA balance, the only way to prevent returning is to fix the system. Restructure your schedule of values to front-load legitimate costs, get pay apps submitted on the first eligible day of every billing period, and build a 13-week cash flow forecast so you can see holes before they become emergencies.
The overhead rate you have been using in bids is probably wrong — most contractors who come to SPM with MCA debt are running 4–8 points below actual overhead. Calculating your true overhead rate and using it in future bids is what turns the corner from survival to profitability.
This contractor came to SPM carrying four active MCAs. Total daily ACH pulls were consuming over $3,000 per day before payroll, materials, or subs. The business was profitable — gross margin was in a reasonable range — but cash was structurally impossible because the daily pulls exceeded what the billing cycle could generate.
Collected in AR within the first 30 days — money that had been sitting in invoices nobody was following up on. That cash funded the first two MCA payoffs.
Overhead was miscategorized — personal expenses, equipment that should have been depreciated, and owner draws were all running through overhead. Correcting it immediately changed the bid model for every future job.
On track to be completely debt-free by the end of 2026. The MCAs did not cause the problem. The billing and overhead structure did. Fixing those fixed everything.
— $80,000–$300,000 in AR older than 45 days that nobody is chasing
— Overhead rate in bids 4–10 points below actual overhead
— Pay apps submitted 5–15 days late on every billing cycle
— No job costing — no visibility on which jobs are profitable until closeout
— 1–4 active MCAs with total daily pulls of $800–$3,500
When the AR is collected and the billing structure is rebuilt, the daily cash position improves enough to pay down MCA balances without new financing in most cases.
If you are carrying MCA debt, the money to pay it off is probably already in your AR. A free call with Josh takes 30 minutes.
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