A California business owner was paying $6,000 a week on a merchant cash advance. We got him down to $6,000 a month. This is how that works.
A local business owner called us a while back. He was trying to figure out how to get out of a merchant cash advance in California and he was running out of options.
He had taken a merchant cash advance a few months earlier. Needed capital, the bank had said no, and the MCA funder said yes in two days. At the time, it felt like the answer.
By the time he reached us, he was paying $6,000 a week. Not a month. A week. Every Monday, that amount left his account. Good week or bad week, it did not matter.
We thought we had misheard him.
We had not.
He owned a commercial property with real equity sitting in it. We secured a bridge loan against that property, paid off the MCA in full, and restructured his payments. He went from $6,000 a week to $6,000 a month.
Same man. Same business. Same property. Completely different situation.
He now has time to rebuild. The pressure is off. And when the bridge term ends, he refinances into a bank loan and moves on.
That is why I am writing this article. Not to sell anything. Because if you are in an MCA right now, you may not know that this path exists. And you deserve to know.
“He went from $6,000 a week to $6,000 a month. Same man. Same business. Same property. Completely different situation.”
What You Are Actually In
The reason that situation is possible, $6,000 a week with no ceiling and no end date, comes down to what a merchant cash advance actually is.
A merchant cash advance is not a loan. This is not a technicality. It determines how the product is regulated and what protections apply to you.
When you signed with Kapitus, Credibly, Yellowstone, or any other MCA funder, they did not lend you money. They purchased a portion of your future receivables at a discount. You received a lump sum in exchange for agreeing to repay a larger amount over time, drawn from your daily revenue. Because it is structured as a purchase and not a loan, it sits outside most of the regulations that govern traditional lending. At the federal level, there is no requirement to disclose the equivalent annual percentage rate.
California has its own rules, which we will cover in detail below. But first, the math.
The Real Cost
MCA funders price their product using a factor rate. A factor rate of 1.35 means you borrow $100,000 and repay $135,000. That sounds like a 35 percent fee. It is not. When that repayment happens over six to nine months through daily debits, the effective annual percentage rate is typically between 100 and 200 percent. On shorter terms or higher factor rates, it can go higher.
This is not a judgment on any specific funder. It is the structure of the product. In most states, the cost is not required to be disclosed as an APR. Many borrowers do not understand what they agreed to until they are already in it.
How Stacking Happens
Most businesses that get into serious MCA trouble do not take one advance. They take several.
The pattern is predictable. You take an MCA to solve a cash flow problem. The daily debits create a new cash flow problem. You take a second advance to cover the gap. Now two funders are pulling from the same revenue stream. A third advance follows. Each one gets more expensive because your debt load has grown and your options have narrowed.
A 2025 Bloomberg Law analysis documented 230 bankruptcy filings involving MCA debt. One of those businesses filed for Chapter 11 in December 2025 carrying 21 stacked MCAs totaling $3.6 million. The attorneys who handled the case described it as not unusual.
The MCA industry is built around renewal. Once you have paid off 50 percent of an advance, most funders will offer you a new one. The offer arrives when you are most vulnerable and have the least leverage to push back.
“Each renewal calculates the new advance on the old balance plus fees. You end up paying interest on interest. That is how a short-term cash flow fix becomes a years-long obligation.”
The Clause Nobody Reads
Many MCA contracts include a confession of judgment, sometimes called a cognovit note. This is a pre-signed legal admission that allows the funder to obtain a court judgment against you without notice and without a hearing.
If you default, the funder does not sue you in the ordinary sense. They file the confession with a court, often in a state with creditor-favorable laws, and walk out with a judgment. That judgment can be used to freeze your bank accounts and seize business revenue.
The FTC permanently banned one MCA operator from the industry in 2023 specifically for using confession of judgment clauses to seize assets. New York banned their funders from issuing a confession of judgment to any out-of-state borrower, including California residents, as of 2019. Most large MCA funders are headquartered in New York. That means the COJ clause in your contract may be unenforceable if your business is in California and your funder is a New York entity.
If your contract contains this clause and you are behind on payments, the timeline for escalation can be shorter than most borrowers expect. A California attorney can tell you whether the clause is enforceable in your specific situation.
The Exit: How to Get Out of a Merchant Cash Advance Using Real Estate Equity
If you own commercial real estate or investment property with real equity, that asset can serve as collateral for a private bridge loan. The bridge loan pays off the MCA balance in full on day one. You replace daily debits with a single monthly payment. Your cash flow stabilizes. The pressure lifts.
In 2025, the SBA stopped allowing its loan programs to refinance MCA debt. Banks were not structured for it to begin with. Private lenders are one of the few options with the flexibility and the timeline to pay off merchant debt using real property as collateral.
This is a trade, not a gift. A private bridge loan carries higher rates than conventional financing, typically 10 to 13 percent annually in Northern California, plus a few origination points. Against an MCA running at a 120 percent effective rate with daily debits, that is a meaningful improvement. But you should understand the full picture before you decide.
What the Trade Actually Looks Like
A business with $150,000 in stacked MCA balances and $2,000 in daily debits is paying roughly $60,000 per month. A private bridge loan for the same $150,000 at 12 percent annually over 18 months costs approximately $1,500 per month.
That is a structural change to the economics of the business, not a rounding difference.
The bridge loan also has a fixed term and a defined end date. An MCA has neither. You know exactly what you owe and when it is over. That clarity has real value when you have been operating under the uncertainty of daily draws.
The Path Back to Conventional Financing
The bridge period is not the destination. It is the stabilization window.
The goal during the 12 to 24 month term is to get the business bank-ready: clean financials, stable revenue, reduced debt load. When the bridge term ends, you refinance into a bank loan. That is what Bridge to Bank means. You are not trading one expensive product for another. You are buying time to fix the underlying file.
This is also why a credible exit strategy matters before you take the bridge. If the business cannot reach bank-ready status in practice within the term, a bridge loan only delays the problem. We will say that directly before we take your file forward.
What You Need to Qualify
Private bridge lenders underwrite the asset, not the income statement. That is the structural difference that makes this path available to borrowers who cannot qualify for a conventional loan right now.
At Mayacamas, we generally need four things: real property with sufficient equity, a business purpose for the funds, a credible exit strategy, and a loan-to-value ratio that protects both parties. We typically lend to 65 percent LTV or below. The property can be commercial or investment residential. It does not need to be free and clear.
What we do not require is a profitable tax return or a record revenue year. We expect to see a business that has been through something and is working its way back.
What California Law Requires
The following is general information about California law, not legal advice. For guidance specific to your contract, consult a licensed California attorney.
California was the first state in the country to require MCA disclosure. Under SB 1235, any funder offering a merchant cash advance to a California business must provide a written disclosure before the contract is signed. The law took full effect in December 2022. That disclosure must include the total repayment amount, total cost of financing, estimated term, and the annualized rate calculated using the DFPI methodology.
The funder’s location does not matter. The law is triggered by where your business is located, not where the funder operates. An online funder based in New York, Georgia, or anywhere else still has to comply with SB 1235 if your business is based in California. Out-of-state funders cannot avoid this requirement by operating remotely or online. Jurisdiction attaches the moment the offer is directed to a California merchant.
When a Bridge Loan Is Not the Answer
This path requires real estate equity. If you do not own property, a bridge loan is not available to you through us. If you own property but the equity is not sufficient to cover the loan, the same applies.
It also requires a credible exit. If the business cannot return to bank-ready status in practice within the term, a bridge loan only extends the problem. We will tell you that before we take your file forward. A bridge that leads nowhere is not protection. It is a slower version of the same situation.
If your outstanding balance is under $50,000 and your cash flow is recovering, paying it off through operations may make more sense. Adding origination costs and closing time may not be worth it.
If You Want to Find Out Whether This Works for You
The first call costs nothing. You tell me what you are carrying and what you own. I tell you honestly whether the numbers work.
If they do, a bridge loan can close in two to three weeks. You could be off the daily debit schedule sooner than you expect.
If they do not, I will tell you that and try to point you somewhere useful. No pressure and no obligation. That is not a sales line. It is just how I prefer to do business.
Reach us at mayacamaslending.com or call our Santa Rosa office directly.
Ian Tavelli is the founder of Mayacamas Lending, a private bridge lender based in Santa Rosa, California. DRE #02306252.
This article is for information only and does not constitute legal or financial advice. The information about California SB 1235 and related regulations is general in nature. Laws change. Your contract and circumstances are specific. Consult a licensed California attorney for legal guidance and a qualified financial advisor for financial decisions.
