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5 Reasons Why Subcontractors Should NEVER Work With MCA Companies (And Who They Should Work With Instead)

Published: September 14, 2022
Last updated: January 10, 2023
Read time: 6 minutes

Merchant cash advance, or MCA, has fully earned its awful reputation in the construction industry. To say it has a “negative stigma” would be putting it delicately. MCA is downright predatory, and using it can hurt a contractor’s reputation. Subcontractors turn to it only when they think they have to. It’s not exactly a loan; it’s considered an “advance on your future receivables.” But it comes with massive fees and can severely hurt your personal credit score. So why do subs venture to use it in the first place? The same reason they seek out most types of financing: it helps them get paid on a project sooner. That said, you shouldn’t feel a sense of shame or condemnation for using MCA. As a construction business owner, you’re undoubtedly willing to do whatever is necessary to keep your businesses going, all while dealing with a broken payment system. It’s just important to know that there are other, better options at your disposal.

As a financial tool, MCA doesn’t concern itself with what the sub needs. It wasn’t made to benefit the subcontractor, and it isn’t tailored to construction. It was made to benefit the MCA company at the sub’s expense. The good news is there are real alternatives now available. Pay App Advance is the antithesis of MCA. Both help you get project payment faster, but the similarities end there. In this article, we’ll unpack the harmful and exploitative traits of MCA, while showing why pay app financing is the superior choice. 

1. Harms Your Relationship with the GC

Why MCAs Fall Short: When you start working with an MCA company, you borrow against your future earnings. However, if you miss a single payment — maybe because you’re waiting for payment from the GC or stretched thin by other invoices — the MCA company will quickly consider you in default and charge additional fees. More importantly, the moment you miss a payment, they might begin blowing up the GC’s phone, hounding them for payment. This puts you in an awkward position; it jeopardizes your personal relationship with the GC, and their perception of your brand

How Pay App Advance Solved The Problem: Maintaining your relationship with the GC is critical. For that reason, Billd never cuts you out of that relationship, even when they advance a portion of your pay app. Instead of leapfrogging you and going straight to the GC for payment, Billd lets the money flow through you, protecting your ability to manage the relationship with the GC. 

It’s a win-win: the GC gets to directly pay and interact with the sub they hired, and you don’t have to worry about a third party muddying those waters in your name. This reduces operational overhead for the GC, and reduces friction for the sub. Because Billd leverages its working knowledge of the construction industry, they know how important that relationship is. As a supporting member of your team, Billd aims to stay at arm’s length with the GC. Once you receive your payment from the GC, you can then pay Billd back, in accordance with your payment terms. 

If for any reason they need to reach out to your GC, rest assured, they will let you know before that happens.

loans for construction companies

2. Hits You with Nightmarish Financing Charges

Why MCAs Fall Short: The fee structure of MCA companies is unethical, verging on unbelievable. Let’s say you decide to take a $200,000 merchant cash advance. The advance will cost you a percentage of the amount you’re approved for. This is called a factor rate, and can reach as high as — brace yourself — up to and even over 100%. If you’re advanced $200,000 with a rate of 40%, the MCA will cost you a whopping $280,000. No borrower should tolerate financing fees so outrageous.

How Pay App Advance Solved The Problem: Pay App Advance is a pay when paid product, unlike MCAs — which can charge you a principle plus daily, weekly and monthly interest, even after you’ve paid off your loans. With Billd, if you need 45 days to pay because you won’t be paid until day 45, then you can comfortably pay Billd on day 45. If you need 60 days because you won’t be paid until day 60, you can take 60 days, and know exactly what it’s costing you. You enjoy 100% transparency about the cost and process. In effect, you choose what you pay. Billd is up front about the weekly fees you’ll pay on the advance. Nevertheless, the overall process hinges on the simple idea that you pay them when you get paid; they don’t make you scramble to pay them prior. 

Billd strives for transparency across the board. There are zero surprise fees or fee increases. In fact, they proactively communicate with you via email. They offer a predictable timeline (in their experience, pay apps take roughly 50 days), and all of your steps are clearly outlined. They go so far as to share emails they need to send to your GC with you first, to ensure you’re kept in the loop. 

3. Can Severely Hurt Your Personal Credit

Why MCAs Fall Short: Most business owners, past a certain point, no longer have to use personal credit when acquiring funds for the business. The business eventually secures funds on its own merit and credit history. That’s not the case with MCAs. The simple act of applying can do a number on your personal credit score. This is because MCA deals are usually sourced through brokers. The broker secures your signature on an application, ships it off to every lender they think might be interested, and then each lender independently pulls your credit score. So many inquiries in a short period of time can all but wreck your personal credit — even if you don’t get approved.

How Pay App Advance Solved The Problem: When using Pay App Advance through Billd, one of our criteria involves personal FICO scores, however they never hard-pull your personal credit. Instead, they soft-pull to determine if you/the owner is meeting 3 of 4 factors to be approved for pay app financing. 

4. Can Lock You into a Vicious Cycle of MCA Debt

Why MCAs Fall Short: Let’s say you do miss a payment, the unethical broker will probably try to set you up with another MCA. Robbing Peter to pay Paul, if you will. Your current lender or a new one may offer you another MCA, totaling roughly half the amount of the first one. This practice is known as “stacking,” and it only plunges you deeper into the hole of debt. They also apply UCC liens, which are objectively neutral, but MCA companies use them in a uniquely nefarious way. Their goal is to prohibit you from turning to other financial institutions for new loans or funding, making that MCA company your only choice. 

How Pay App Advance Solved The Problem: Because Billd’s goal is to set you up for success from the outset, they craft financial solutions that will ultimately help your company and keep it thriving, not debilitate it. Plunging you into a vicious cycle of unmanageable debt would never help them as a company, and in their eyes, is cruel and amoral. To help you avoid going into a debt spiral, they offer you a robust 60 days to pay them back for what you borrow. Billd will work with you, not against you, if any payments are missed to help you find a solution. 

5. Doesn’t Care about Your Team & Company

Why MCAs Fall Short: For this article, we spoke to a young professional who previously worked in an MCA company and got their perspective on how companies like this operate. Although they prefer to remain anonymous, they had this to share: “I’ve never seen such callousness in a company. I worked at an MCA firm on Wall Street, was new to finance, and didn’t know how unscrupulous the business model was,” they said. “The manager had an arrogant, “Greed-is-good” mentality, and would trash-talk his own customers and their financial situations. I was scared of the vicious threats coming out of the collections office window. They were kindest to customers when trying to persuade them to sign, then ruthless once they had them. Customer service was nonexistent. It was a numbers game, with underwriters desperate to sign as many deals as possible, even if the customer wasn’t a good match for the product. I realized I worked in a predatory loan company, and couldn’t work there in good conscience. I quit after less than 3 weeks.”

How Pay App Advance Solved The Problem: The opposite is true with Billd and Pay App Advance. Billd acts as an extension of your team. We spoke to an experienced member of the team at Billd to get their perspective on just how much they differ from MCA companies. He gave an example of a real subcontractor who used a product similar to MCA, to illustrate the harm it does. “The difference between MCAs and Billd is stark. And here’s why: Something recently came across my desk that was really upsetting. I spoke with a contractor using a hybrid “line of credit” with an advertised low interest rate. Although not technically an “MCA”, these lines of credit require repayment in full within 3-4 months. While the subcontractor was waiting to be paid by the GC, they were paying weekly payments to this predatory lender that were 18 TIMES higher than what Billd charged for the same amount of financing. Aligning our financing with the subcontractors’ cash flow and receivable cycle keeps more money in your bank account when it matters most. It saddens me to think that this subcontractor didn’t know that he had an infinitely better option in Billd.”

Billd’s mission is to advocate for subcontractors and make meaningful changes in the arsenal of financial tools that subs have at their disposal. To learn more about how you can get started with Pay App Advance, visit

About Billd: At Billd, we provide a payment solution that enables commercial construction contractors to free up cash for material purchases while enjoying the flexibility of 120-day payment terms. You get financing for commercial materials upfront with the freedom to pay it back at your own pace. Learn more about how we can help eliminate your company’s cash-flow problems so you can win more bids and grow your business.

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Chris DoyleCEO & Founder of Billd

Christopher Doyle is an entrepreneur and business leader with extensive construction industry experience and a record of launching successful startups. He is the co-founder and CEO of Billd, a disruptive payment solution for the construction industry that helps contractors and suppliers grow their businesses with less hassle and risk. Recognizing the cash flow hurdles that contractors face when purchasing materials, Doyle launched Billd to make traditional Wall Street working capital accessible to business owners in the construction industry.

Are you ready to unlock more working capital for your business?

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