While traditional bank loans in 2025 range from roughly 8.5% to 18% APR, some MCAs have been documented with effective annual interest rates as high as 820%. This is more than 50 times the legal interest rate for standard commercial loans.

As part of the massive 2025 Yellowstone settlement, over $534 million in outstanding small business debt was immediately and automatically canceled. This gave over 18,000 merchants across the U.S. total relief from their balances.

The executives of some predatory MCA firms have been permanently banned from the merchant cash advance and debt collection industries as part of settlements with state and federal authorities

Some MCA contracts include a “Confession of Judgment” clause, which allows a funder to bypass a standard trial and immediately obtain a legal judgment against a borrower if they default. This can lead to rapid asset seizures without the business owner having a chance to defend themselves in court.

Because of their high daily costs, many business owners find themselves in a cycle where they must take a second or third MCA just to pay off the first one. This “stacking” often leads to a spiral that eventually forces the business to close.

While MCAs are technically supposed to be purchases of a percentage of future sales, many predatory funders charge a fixed daily amount. This means even if your business has zero sales for the day, they still withdraw the same amount from your bank account.

In late 2024 and early 2025, MyPillow CEO Mike Lindell filed lawsuits against several MCA firms, alleging he was “duped” into borrowing $1.6 million at a 409% annual interest rate. The lawsuits include accusations of wire fraud and RICO Act violations.

In federal court cases, some MCA operators have been permanently banned after the FTC alleged they used unfair collection practices, including making threats of physical violence to compel small business owners to pay.

In mid-2025, the FTC shut down several “phantom” debt collection operations that targeted consumers and small businesses. These scammers convinced victims they owed fake debts, threatening them with immediate lawsuits and damaged credit if they didn’t pay millions in non-existent balances.

The reality of the merchant cash advance industry unveils an unregulated environment where exploitative tactics—ranging from astonishingly high APRs of 820% to intimidating illegal collection threats—can drive even the most legitimate small businesses to the edge of financial ruin. The landmark settlements of 2025 against major players like Yellowstone Capital serve as a significant signal that a shift is underway. Entrepreneurs are no longer obligated to endure their struggles in silence; gaining insight into the legal precedents and the various options available becomes an essential first step in halting the relentless daily debits, restoring positive cash flow, and paving the way for a more secure and sustainable future for their businesses.