The Indicator from Planet Money The shadowy world of merchant cash advances
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Mar 11, 2026 
Joshua Esnard, founder of The Cut Buddy, shares a small business owner’s tale of tariffs and crushing merchant cash advance debt. Alina Seljuk, NPR business reporter, explains how these advances work, why they skirt regulations, and how they target desperate businesses. They discuss urgent cash needs, opaque repayment practices, and efforts to rein in predatory lenders.
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Tariffs Turned A Good Year Into Crushing Debt
- Joshua Esnard turned a patented hair-tool business into $6M annual revenue but was slammed by new tariffs that exceeded product value.
- He took three merchant cash advances to pay $4,600 on a $3,000 shipment, pushing his obligations to about $1.2M in debt.
MCAs Are Purchases Not Loans So They Evade Lending Rules
- Merchant cash advances (MCAs) are structured as purchases of future sales, not loans, letting lenders avoid most lending laws.
- That legal framing allows unlimited fees and direct bank-account withdrawals as repayment mechanisms.
Effective MCA Rates Can Be Extremely High
- Because MCAs bypass lending statutes, reported effective rates can soar (examples ranged 30% to 300%).
- Lenders commonly recoup by automatically withdrawing a cut from the merchant's bank as sales come in.