Merchant Cash Advances Drive Surge in Small Business Bankruptcies

Merchant cash advances (MCAs) are increasingly driving small businesses into bankruptcy across the United States. These financial products are marketed as fast liquidity but often carry triple-digit effective finance costs. In one instance, a disclosure for Triways, a Southern California trucking firm, revealed an annual percentage rate of 2,190%.

John Jauregui, Chief Executive of Triways, utilized more than 30 advances over 2.5 years to fund expansion and cover operating gaps. Despite attempting to reorganize under Chapter 11, the company's case was dismissed in June 2026, and Triways ceased operations in September 2026. MCA funders typically withdraw payments daily or weekly directly from bank accounts, which often leaves businesses unable to cover rent or payroll.

An analysis of bankruptcy filings indicates that MCA funders were creditors for 51% of small businesses that went bankrupt during the first nine months of 2026. The Federal Reserve Bank of Kansas City reported in October that these advances have exacerbated liquidity difficulties for small firms. In response to high failure rates, the Small Business Administration has stopped refinancing MCAs. Meanwhile, the Small Business Finance Association maintains that alternative financing is a necessary tool for businesses rejected by traditional banks.