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What is a merchant cash advance?
A merchant cash advance is a form of business funding where a funder gives you a lump sum of cash today and, in return, purchases a fixed amount of your business's future receivables. Instead of monthly loan payments with interest, you repay through small, frequent payments — usually daily or weekly — taken from your business bank account or card sales until the agreed amount is paid.
Because an MCA is a purchase of future revenue rather than a loan, approval depends mostly on how much money your business brings in, not on collateral or a perfect credit score. That's why MCAs are one of the fastest ways for an established small business to get cash.
How does a merchant cash advance work?
- You apply with basic business and owner information plus your last 4 months of business bank statements.
- The funder reviews your revenue — average monthly deposits, consistency, daily balances and existing obligations.
- You receive an offer showing the advance amount, factor rate, total payback amount and payment schedule.
- You sign and get funded, often within 24 hours.
- You repay automatically through fixed daily or weekly payments (or a percentage of sales) until the total payback is reached.
MCA terms you should know
| Term | What it means |
|---|---|
| Advance amount | The cash you receive (before any fees). |
| Factor rate | A multiplier (e.g. 1.3) that sets the total payback. $20,000 × 1.3 = $26,000. |
| Total payback / purchased amount | The total amount of receivables you sell — what you'll pay back in total. |
| Holdback / specified percentage | The percentage of daily revenue used for repayment. |
| Remittance | Each individual daily or weekly payment. |
| Reconciliation | A process to adjust payments if your actual revenue changes. |
| Position | The order of advances on your account (first position, second position, etc.). |
| UCC filing | A public notice that the funder has an interest in your business receivables. |
How much does a merchant cash advance cost?
MCAs are priced with a factor rate instead of an interest rate. Factor rates typically range from about 1.1 to 1.5. Here's an example:
Example: $30,000 advance × 1.35 factor rate = $40,500 total payback. The cost of funding is $10,500. Over 6 months (about 126 business days), the daily payment would be roughly $321.
Because MCAs are usually repaid over a few months to about a year, the equivalent annual cost can be high — often much higher than a bank loan. That's the trade-off for speed, flexibility and easier approval. An MCA makes the most sense when the return on the money (a big order, a repair that restores revenue, a supplier discount) is greater than the cost. Use our MCA calculator to run your own numbers.
Where state law requires it — including New York, California and several other states — you'll receive a written disclosure showing the total cost and estimated annual percentage rate before you sign.
Merchant cash advance requirements
Every funder is different, but most look for:
- At least 12 months in business
- Around $10K+ in monthly revenue
- A U.S. business checking account with regular deposits
- Any credit score — revenue is what matters
- No open bankruptcies; limited overdrafts and negative days
See the full list and tips to improve your approval odds on our MCA requirements page.
Pros and cons of a merchant cash advance
Pros
- Very fast approval and funding
- Approval based mainly on revenue
- Bad credit can be considered
- No real estate or equipment collateral
- Use funds for any business purpose
- Payments can adjust with revenue
Cons
- Higher cost than bank financing
- Daily or weekly payments affect cash flow
- Short terms
- Early payoff may not reduce cost
- Multiple advances can become hard to manage
Merchant cash advance vs. business loan
| Merchant cash advance | Business loan | |
|---|---|---|
| What it is | Purchase of future receivables | Borrowed money with interest |
| Approval based on | Revenue and bank activity | Credit, collateral, financials |
| Speed | Hours to days | Weeks to months |
| Payments | Daily or weekly | Usually monthly |
| Cost | Factor rate; higher total cost | Interest rate; usually lower |
Read the full comparison: MCA vs. business loan.
Is a merchant cash advance right for your business?
A merchant cash advance may be a good fit if:
- You need capital within days, not weeks
- Your business has steady monthly revenue
- You were declined by a bank or don't want to pledge collateral
- The funding will generate more revenue or savings than it costs
It may not be the right choice if you can wait for a lower-cost bank or SBA loan, or if daily payments would strain an already tight cash flow.
Other funding options
- Same-Day Business Funding
- Bad Credit Business Funding
- Working Capital
- Revenue-Based Financing
- MCA Consolidation
- No-Collateral Funding