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I've heard recently of a relatively new practice of small business loans called Merchant Cash Advances. Wikipedia explains how it works here and goes through some of the legalese to demonstrate the loophole that allows purveyors of this practice to avoid usury laws and oversight.

I'm not at all a maven in business nor in ribbis but I was wondering if there's any literature in halacha that deals with this practice or something similar. From a legalistic standpoint it's legit albeit shady but to my untrained sensibilities it carries a whiff of dishonesty and perhaps avak ribbis if not actual ribbis.

Thoughts, sources?

  • Reading the wikipedia article, I do not see how interest is charged. If set up properly, it might be lik a heter iskah of a type, but I cannot tell from the what the article is written. It could also be ribbis. – sabbahillel Feb 14 '17 at 0:20
  • Hence my question. According to secular law the MCA does not qualify as a loan in the traditional sense making it not covered under typical usury laws. However, the merchants do charge more than the loan itself in their payback and they make a tremendous profit from these "loans". Bllomberg had an article of two ex-yeshiva guys living a life of debauchery after striking the mother lode using this practice; from their article it sounds like they take advantage of desperate small business owners who are otherwise ineligible for standard business loans. – Shmuel Brown Feb 14 '17 at 14:28
  • Wikipedia describes the lender as paying the businessman a fixed amount in exchange for a (larger) fixed amount taken from credit-card sales. It doesn't, however, describe what happens if there are insufficient future credit-card sales to repay the agreed-upon amount. Does the lender lose out, then, or does the businessman need to repay by other means? I have a feeling (not that I know much at all about hilchos ribis) that the answer to that question may be relevant. – msh210 Feb 19 '17 at 6:42

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