Short YouTube talk by Charles Leikauf describing how even successful eight-figure entrepreneurs (>$10M revenue) can accept extremely expensive merchant cash advances (e.g., ~85% APR) due to lack of financial education; the speaker explains how repayment timing inflates APR and emphasizes the value of fractional CFOs to guide clients and prevent costly borrowing decisions.
I had a CFO client who's been a client for the last couple years. He's been successful since 2001. He's over done over $10 million a year since 2001. Very smart guy. Now one of the things he did as even he's an eight figure entrepreneur, is he went out and he borrowed over a million dollars at an 85% interest rate. And I know your thought is, well, why the equity? Borrow a million dollars at an 85% interest rate. That can't be real. I can get 22, 23, 25% of my credit cards. The thing is, is that it was presented to him in a way that didn't make sense. It was presented to them in a way that's called a merchant cash advance. And what that is is people ask you for a percentage of your daily sales. Now if you do the math and you use an APR calculator, if you borrow a hundred dollars and you pay back 110, you do it over a year, that's a 10% APR. You do it in six months, it's a 20% APR. You do it in three months, it's a 40% APR. You do it daily over three months, and it's like a 73% APR. When you look at that, it's really easy for me to make the loan cheaper or more expensive on an APR basis by, by playing with the time function. And so people who sell merchant cash advances do that. So I've had more than 10 clients who do over 10 million a year sign up for these when they could have gotten a line of credit for 10% or 12% or credit cards at 18%. Why did they sign up for the 80% APR loan is because no one sat down and educated them on this. When they became my CFO client, then we brought them through all this and they never made that again. But if you're looking to get started as a fractional cfo, you have to guide clients through this process. You can save them millions of dollars a year.
