Every contractor knows the feeling, you are three draws into a job, the GC is slow-paying, payroll lands Friday and a lender you have never heard of calls promising low interest, no strings and $80,000 by tomorrow morning. No collateral, no hard credit pull, just a signature.
Debt-relief groups say construction companies and contractors are among the businesses most often trapped by cash advances, which are the most expensive form of small business credit.
These high interest small business credit tools are designed around the exact pain points that contractors feel—progress billing, retainage and 60-day receivables make contractor cash flow lumpy. They also know something else: you are running crews, quoting jobs and chasing inspections.
You do not have 40 hours to compare lenders, another 40 to create individual applications and another week to wait for an answer, so they have found a way to monetize the one thing everyone in the trades lacks, time.
Alarm Bells
Before you sign anything, listen for these five alarm bells.
1. Explaining the repayments is complicated
Predatory offers hide behind various different terms and if the repayment isn’t clear it’s because they have tied it up with different fees, structures & timings. Take "factor rates" as an example; they sound small but can translate into triple-digit annual costs. A 1.4 factor rate on a six-month advance can exceed 100% APR (annual percentage rate), and effective rates on MCAs run as high as 350%. If you cannot get the annual percentage rate, the total payback, and every fee in writing, that is your answer.
2. Repayment doesn’t sound straightforward
Companies that sell merchant cash advances are in essence buying your future revenue, and they want to be repaid daily. While these instruments are helpful for growing companies, they can really hurt when payments are delayed. Merchant cash advances pull money from your account every banking day, whether or not the GC has paid the draw. Repayment that ignores how contractors actually get paid is a structural trap and you should always consider aligning the loan term with either the asset, the job or the draw down.
3. You have to sign today!
Repeated calls, countdown clocks and offers that "expire in 24 hours" exist to stop you from reading the contract or comparing terms. Legitimate lenders give you time to run the numbers past your accountant. Manufactured urgency is the oldest alarm bell in lending, and it works best on people with no time, which is to say, contractors. If you are in this situation tools like OpenAI / Claude / Gemini can help. Copy the contract across with this instruction “what are the most important parts of this contract I need to know”
4. Anyone asking for fees to process
If you hear that the lender charges a "processing fee" or "insurance deposit" before money is disbursed—Red FLAG. Advance-fee scams are growing and getting especially sophisticated at targeting small businesses. While some fees from lenders can be common, they are generally taken out of the money that hits your account.
5. Biggest red flag of them all!
A confession of judgment lets a funder obtain a court judgment without notice or trial, sometimes freezing your accounts before you know a filing exists. A UCC blanket lien can let a funder tell your GCs and customers to redirect your receivables at the source. Any contract containing these terms deserves a lawyer's eyes first. We have seen horror stories, where courts are completely skipped, and businesses lose entire jobs worth of revenue, with little to no recourse.
The Broker Trap
Contractors are time poor, want to grow or keep the business going and need help but here is the uncomfortable part: brokers are incentivized to put you into the most expensive debt possible. Their commissions can top 20% of the total loan size.
What Good Looks Like
The good news is that technology is finally pointing the other way, providing options that scan the entire market, find the best solution and walk you through to closing for free in the time that you need.
That is the gap Frank was built to close. Frank is an AI loan broker that searches more than 550 US lenders in under 60 seconds, negotiates on your behalf and works for you, not the lender. It is completely free to the borrower, with no kickbacks steering your file and no hard credit pull to see your options. You see the exact cost of every offer upfront, terms typically come back within hours and repayments are fixed monthly, where they are not—you are notified.
In other words, the answer to the alarm bells is not avoiding speed. It is demanding speed and transparency at the same time. The guy on the phone promising $80,000 by morning is counting on you being too busy to check. Now it takes 60 seconds to prove him wrong.
