Cash Advance | Imamother

amother

Violet

Thu, Jan 13 2022, 9:19 am

amother [ Stone ] wrote:

Of course. There are 2 bad choices. You're explaining why one of them (borrowing money on high interest) is a terrible idea. But you're completely ignoring the consequences of not borrowing the money.

Again, if the boiler is broken in the middle of winter and it will cost $1000 to fix. Is it better to let the family freeze half to death, or borrow $1000 on 20% interest? Please choose one. Don't only explain why borrowing is a "debt trap". Plz explain why a debt trap is worse than no heat in January.

Because the following month they have to pay the amount they borrowed plus the high interest charge. Then they also have the next month’s bills on top of that. Logically speaking, if they were forced to borrow that money to pay for the broken boiler - that means they had no other option - no savings to use instead. Potentially, the following month another financial emergency comes up and now they have even less in their bank account from this month’s salary, due to paying back the short term loan. Financial “emergencies” actually come up a lot. People without savings suffer because they didn’t save for these things that come up from time to time.

Edited to add: getting into this business and pretending it’s for altruistic reasons is a complete lie. It’s a well known fact that people who use these places are in a bad place in their life. There is nothing charitable about charging the exorbitant interest that these places do.

Rubies

Thu, Jan 13 2022, 9:21 am

amother [ Stone ] wrote:

Many people wouldn't borrow from family or friends or a gemach as first choice and they see this as a viable option until they're choked.
Not everyone thinks straight and makes good decisions under pressure.

If you don't want the family to freeze to death, collect some tzedakah rather.

amother

Pink

Thu, Jan 13 2022, 9:35 am

These aren’t personal loans. They are cash advances for businesses. It is not against a persons paycheck, it is not a payday loan. Only businesses can get these types of contracts and it is based on revenue

Many businesses funded are using the funds to increase revenue, so they don’t get stuck in a cycle of debt. And many businesses are at a point where they have no other option and would otherwise have to close or lose a lot of business

For example similar to the persons heating issue, if a restaurant needs to replace an oven but does not have the amounts needed for it, and without an oven they cannot operate, it makes sense for them to take a cash advance. They cannot for whatever reason get a traditional loan with lower interest rates, and this is their only hope so it is worth it for them.

amother

Violet

Thu, Jan 13 2022, 9:38 am

amother [ Pink ] wrote:

The OP did not say it was cash advances for a business. She asked: “My husband is considering a job. What is the business?”

Edited to add: Also, you are incorrect people can get personal cash advances.

amother

Molasses

Thu, Jan 13 2022, 10:07 am

If your dh is considering it, please make sure it’s a reputable company with honest practices. I’m sorry to say many frum cash advance companies are lacking these integral qualities and are riddled with shady and unethical business practices. Many people open these companies to make a quick buck and that’s all they care about.
Dh has been working for a great (non Jewish) company that offers many financial services, cash advances being just one of them. It is miles apart from the previous (frum) company he worked for.

Amarante

Thu, Jan 13 2022, 10:11 am

It really depends on exactly how the business is run including what the interest rate is.

Lending money as a "cash advance" to companies is actually a form of financing which is prevalent in many industries including the garment industry historically. It is used in industries in which one needs to lay out significant amounts of money for materials but aren't paid for the finished goods until delivery of the dresses. It is money that is lent against the accounts receivable. It is called "factoring" and the factor is the entity supplying the funds.

We spent a LONG time studying this when I went to law school because I spent two semesters studying the Uniform Commercial Code which deals with it as well as other "law" relating to commercial commerce. Because the collateral is the accounts receivable it involves issues of priority and perfecting the lien on the collateral. The accounts receivable are "sold" to the factor at a discount and the borrower then has money to purchase materials and pay workers to produce the items which are sold.

So really what is the business - is it legitimate financing for companies which are in good shape but structure their finances because of normal cash flow or is it a business that is desperate for money.

So-called payday loans to consumers are considered to be predatory because of the high interest rates which essentially trap minimum wage workers into an economic death spiral and are really just a legalized form of a loan shark exploiting a hapless victim. ETA - Anyone who works for a consumer payday loan company is - IMHO - living out the stereotypical trope first personified in Merchant of Venice. Sad

Last edited by Amarante on Thu, Jan 13 2022, 1:13 pm; edited 1 time in total

amother

Pink

Thu, Jan 13 2022, 12:30 pm

amother [ Violet ] wrote:

If she is talking about a job for her husband in cash advance, then I safely assume she means MCAs, which is an industry predominantly filled with jews. I very highly doubt she means personal cash advances like credit cards or payday companies give out.

I am referring specifically to the MCA industry but OP can correct me if I’m wrong and this wasn’t what she meant