Merchant Cash Advances


What is a Merchant Cash Advance?

A Merchant Cash Advance (MCA) is an advance of cash to a business in exchange for a percentage of future sales. MCAs typically serve businesses with credit or debit card sales– restaurants, retailers, services, or any company whose customers pay with a card. This simple arrangement allows MCA providers to take a cut of daily or weekly sales through a credit card processor until the advance (plus fees) is paid off.

Need funding fast? Prefer a short, easy application with minimal requirements? A Merchant Cash Advance can get you the funds you need in a hurry, without the hassle.

Recently, MCAs have evolved to serve businesses without credit card sales. In these cases, it’s often called a “Business Cash Advance”. Instead of taking payments from card sales, providers can link up with a company’s bank account and take payments through ACH (Automated Clearing House) withdrawals.

How Does a Merchant Cash Advance Work?

Note that MCAs are not loans. They are advances taken against future sales. However, just as lenders charge an interest rate, MCA providers charge a factor rate.

To calculate the cost of an MCA, take the factor rate (likely between 1.1 – 1.5) and multiply it by the cash advance.

For instance, a $10,000 cash advance with a factor rate of 1.2 will cost $2,000.  

A cash advance of $50,000 with a factor rate of 1.35 will cost $17,500.

Once the cost is determined, providers will set a “Holdback” amount, which is the amount (portion of advance plus cost) taken from your daily or weekly sales. This generally ranges from 8% to 30%. Therefore if your holdback is 10% on a daily payment schedule, and your sales revenue is $300 in one day, your provider will take $30 towards repayment. If your holdback is 15% with weekly repayments, and you’ve made $1000 in a week, your provider receives $150. These payments are made until the cost plus the advance is repaid.

A key feature of an MCA is that repayment amounts correlate with your sales. This has an upside—and unfortunately, a downside.

Consider how MCAs differ from loans.

A loan with fixed payments requires the same amount per installment, regardless of your revenue stream. During low periods, you may not be able to make a payment. If you can’t pay on time, you’ll accrue late fees. If you default, your credit will suffer, and worse, you may have to forfeit assets if it’s a secured loan. However, most lenders allow early repayments, which can help you avoid extended interest payments. You are rewarded for early repayment.

With MCAs, on the other hand, you won’t pay as much when your sales are down. Remember, your repayment amount is a percentage of sales. It’s not fixed. As long as the advance is eventually paid off in full, you won’t be penalized.

But what if your sales are up? You’ll pay more, but without the benefit of avoiding future interest rates. Therefore, the faster you can pay off your MCA, the less favorably it will compare against a loan.

Bottom line: The better your sales, the faster you pay.
Takeaway: Study your future sales projections before taking an MCA. Agree to a factor rate and holdback amount that will likely pay off the advance gradually (ideally 9-12 months), rather than immediately.

Why Use Merchant Cash Advances?

MCAs are designed for businesses that need funding now—and are willing to pay a premium for it. When urgent expenses arise, you don’t want to fill out a long application, submit 20 documents, and wait a week to see if you’re approved. While MCAs have drawbacks, they can be the perfect financial tool to satisfy your business demands in times of crisis.

Here are some advantages and disadvantages to consider before applying for a Merchant Cash Advance:


Speed! Get approval and funding within 2 days.

No collateral required.

Flexibility! Use the cash advance on whatever you want.

Easy to get approved. Fewer qualification requirements compared with a loan application.

Repayment amount adjusts with sales revenue. If the business is slow, rest assured you won’t owe as much.


Can be expensive compared with long-term loans.

Increased sales revenue means higher payments and increased APR.

No reward for early repayment.

Merchant Cash Advance Rates, Cost and Terms

Depending on the risk you present to MCA providers, you’ll get a holdback amount of 8-30%. Remember, that’s the percentage taken from your credit card sales or bank account on either a daily or weekly basis. While there are no set terms, most MCAs are paid off within 3-12 months (in some cases, up to 18 months).



1.1 -1.5

Factor Rate


Credit Limits

2 days

Funding Speed

While there is no “minimum”, most advances range between $2,500 and $500,000. If you’re in a hurry, you can find online providers who will get you funding within a couple of days.

How to Apply and Qualify

MCA providers assess risk differently than lenders. The credit score is far less important (although rates will be higher if it dips below 550). What matters is your sales. Be prepared to show credit card receipts, sales revenue, and sales projections.

MCA providers evaluate risk on a “case-by-case” basis, so don’t be discouraged if your financials aren’t perfect. Given the easy application process, we believe it’s worthwhile to get a quote, regardless of your situation. p for a business line of credit and paying it off in a timely manner can boost your credit score!)

Expect a simple, one-page application, but note that you may be asked to submit 3 months of credit card statements, 3 months of bank account statements, proof of ID—and occasionally, tax returns, balance sheet, and credit score.

Most providers require that you’ve been in business for at least 6 months and that you make at least $5,000 in revenue per month.

Contact us today and let us help you find the right solution to your business needs.