Merchant Cash Advance Explained

If you’re a small to medium-sized business in need of additional financing, you may be curious about your options. A loan could work, but they’re not right for every situation. They involve a lot of paperwork, require good credit, and take weeks to underwrite and fund.

If you do a significant amount of business through debit and credit card sales, a merchant cash advance could provide an alternative. It has minimal paperwork and is much more accessible than conventional business loans. The best part is that it’s not technically a loan. Here’s what you need to know. 

How a Merchant Cash Advance Works

A merchant cash advance (MCA) isn’t a loan. As the name suggests, it’s an advance on future debit and credit card sales. You receive a lump sum payment and the MCA company takes a portion of your future sales until you repay the advance plus applicable fees. Typically, MCA companies automatically withdraw payments daily or weekly. In many cases, they take a percentage of those sales. So, the more you make, the more you pay (and the faster you repay the advance).

The Cost of an MCA

The amount you can get with an MCA varies, but it typically ranges from $10,000 to $1 million.  MCA companies charge a factor rate instead of interest. They apply the rate to the amount of the advance and add it to your total due. For instance, if you get an MCA of $100,000 that has a factor rate of 1.3, the total you would have to repay would be $130,000. 

Qualifications for an MCA

Getting an MCA is generally a lot easier than getting a business loan. In most cases, you need:

  • A FICO score of at least 550.
  • At least 12 months in business.
  • At least $15,0000 in monthly revenue.

MCA Pros and Cons

Pros of an MCA include:

  • No fixed monthly payments.
  • You don’t need to have excellent credit to qualify.
  • Fast funding.
  • No late payments (since the MCA company automatically takes its payments).
  • Your payments fluctuate based on your daily or weekly sales.

Cons of an MCA include:

  • More expensive than conventional business loans.
  • Short-term financing solution.
  • Lack of regulations.
  • You may have limitations placed on your business during your repayment period.            

If you’re looking for financing but need money quickly or don’t qualify for a business loan, a merchant cash advance could offer an ideal solution. As with any form of funding, research your options carefully to ensure that you choose the best fit for your business.


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