Find the Lowest Rates on Merchant Cash Advances

Updated on April 4, 2024
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What Is a Merchant Cash Advance?

A merchant cash advance (MCA) is a type of business financing in which a company advances you a lump sum that you repay via a percentage of your daily credit card and debit card sales, plus a fee. Technically, a merchant cash advance is not considered a business loan; it’s actually you selling your future debit and credit card transactions at a discount.

Typically, merchant cash advances are repaid on a daily or weekly basis and the financing company takes the payment automatically from your payment processor. In this way, repayments are based on your sales—if you experience a slow in sales, your payments will also be lower but it will take you longer to repay the advance.

Merchant cash advances are usually easy to qualify for (even if you’re a startup or have bad credit) and fund quickly; however, they’re known for high APRs—and because they’re not actually business loans, there’s little regulation around merchant cash advances. Generally, you’ll want to consider all of your options for business financing before turning to a merchant cash advance.

Merchant Cash Advance Details

Max. Advance AmountRepaymentFactor FeeSpeed
Up to $500,000Paid daily or weekly via your merchant or bank accountTypically ranges from 1.1 to 1.5As fast as one day
Green checkmarkPros
  • Quick access to funds
  • Easy approval process
  • Accessible to businesses with bad credit
  • Suitable for a range of business purposes
  • Repayment based on your sales
Red X markCons
  • Higher fees than most other loans
  • Daily deduction of credit card sales reduces cash flow
  • Easy to end up in a debt cycle
  • Confusing contracts and little regulation

Top Merchant Cash Advance Companies



Best for: Fast access to funding with the possibility of prepayment incentives.

Reliant Funding

Reliant Funding

Best for: Fast funding with no collateral requirement.

Reliant Funding

How Does a Merchant Cash Advance Work?

Traditionally, merchant cash advances work like this:

  • A MCA financing company provides you with a lump sum of cash.
  • You repay that funding, plus fees, as a percentage of your daily (or weekly) debit and credit card sales.
  • Payments are withdrawn automatically from your merchant account until you’ve repaid the full amount, again, plus fees.

Unlike most other types of business loans, merchant cash advances do not have set annual percentage rates or repayment terms.

Because MCAs typically draw from your debit and credit cards sales, they’ve often been used by businesses that rely on those sales for revenue—restaurants, bars, retail stores, salons, etc.

However, some financing companies will draw repayments directly from your bank account (instead of a merchant account), meaning even businesses that don’t rely heavily on debit or credit card sales can utilize this type of financing. In this case, the process essentially works the same, except the merchant cash advance company connects to your bank account and collects repayment, plus fees, using ACH withdrawals.

Because MCA providers can plug-in to your bank account or merchant service provider, merchant cash advances are easy-to-access, fast to fund products. They are, however, one of the most expensive financing products on the market.

Merchant Cash Advance Rates and Fees

As we’ve mentioned, merchant cash advances are expensive—and therefore, it’s important to understand how MCA financing companies charge fees. Just as MCAs are structured differently than most business loans, the way you’re charged interest on this financing product is different as well.

Instead of an interest rate, merchant cash advance financing companies measure their fees with a factor rate, sometimes referred to as factor fees. The factor rate you receive on an MCA will be based on the company’s evaluation of your qualifications. Typically, factor rates range from about 1.14 to 1.48.

As with traditional interest rates, the higher your factor rate, the higher the fees you’ll pay, and the more your merchant cash advance loan will cost. Generally, if you convert factor rates to an APR, you’ll find that rates start at 15%, but can reach as high as over 100%.

It’s also important to note that some MCA financing companies will charge additional fees—most often, you’ll see an “administrative fee” that is charged to set up your account. Make sure you understand all the costs of a merchant cash advance before agreeing to one.

Merchant Cash Advance Terms

Whereas traditional business term loans have set a repayment period—you repay a loan with monthly payments over a term of five years, for example—merchant cash advance terms do not work the same way.

As we’ve mentioned, you repay the funds you’ve borrowed from an MCA with your debit and credit card sales, or from withdrawals from your bank account. Most often, these payments are made on a daily basis, but sometimes companies will offer a weekly basis.

Because the repayments are based on your sales, the terms of an MCA will vary. In other words, you’ll repay the advance for however long it takes to cover the total amount you received plus fees.

Overall, the average repayment time for a merchant cash advance is eight or nine months. However, the term could be as short as four months or as long as 18—it all depends on your business. To this point, paying the financing company a higher fixed percentage of your sales will equal a shorter repayment time—but also a tighter cash flow.

Merchant Cash Advance Cost Example

Here’s an example of how a merchant cash advance works—and perhaps more importantly, how much an MCA costs.

Let’s say you’re advanced $20,000 from a financing company to fund some renovations for your retail shop. The financing company is charging a factor rate of 1.18.

If you multiply the $20,000 by 1.18, you’ll get $23,600—which is the total amount you’ll need to repay with your daily debt and credit card transactions.

The merchant financing company will take 15% of your credit card sales to cover that amount. How much you’ll actually pay on a daily basis will vary based on your sales. The higher your sales, the faster you’ll be able to pay off the advance.

This being said, let’s say you estimate $25,000 per month in credit card sales. If you divide $25,000 by 30 days in a month, you’ll get approximately $833 per day.That means you’ll pay $125 every day, or 15% of $833.

At $125 a day, it will take 189 days (roughly six months) for you to repay the total amount of $23,600. Although $125 per day may not seem like much, when it comes down to it, the APR on this merchant cash advance loan is nearly 66%—which is extremely high.

This is why MCAs can be so misleading—at first glance, the numbers seem reasonable and a factor rate of 1.18 seems low. However, when you calculate the APR on these products, they often end up being very expensive, especially in comparison to other types of business financing.

For this reason, before you agree to a merchant cash advance from a financing company, you’ll always want to convert the factor rate to an APR to determine the true cost of this debt and decide whether or not it’s something you can afford.

Pros and Cons of a Merchant Cash Advance

At this point, you may have started to see some of the inherent advantages and disadvantages of a merchant cash advance. Therefore, in order to help you decide if this type of financing might be right for your business, let’s break down these pros and cons in greater detail.


  • Quick access to funds: When it comes down to it, a merchant cash advance will be one of the fastest types of financing for businesses. In general, you can apply for an MCA online and receive approval and funding in as little as 24 hours. Compared to other loans that require extensive documentation, MCAs have very simple application processes.
  • Easy approval process: Not only is the process itself simple, but MCAs are one of the easiest financial products to qualify for. MCA companies will often pull your credit score and evaluate your other qualifications; however, they’re much more lenient when it comes to approval. Many financing companies will work with startups, businesses with bad credit, as well as those with previous financial issues. Of course, your qualifications will not only affect your ability to get approved for a merchant cash advance loan, but your rate as well. If you have bad credit, for example, you’re more likely to see higher rates.
  • Suitable for a range of business purposes: Overall, a merchant cash advance can be used to fund essentially any business purpose. You can use an MCA for working capital, to purchase inventory, cover payroll, or any other similar short-term costs.
  • Repayment based on your sales: Whereas repayment on a traditional business loan remains the same regardless of how your business is performing, your MCA payments will vary based on your business’s sales. If your business has a slow period, you’ll be paying less on a daily or weekly basis. For this reason, MCAs are often used by seasonal businesses, retail shops, and restaurants.


  • Higher fees than most other loans: We can’t stress this point enough—at the end of the day, a merchant cash advance will be one of the most expensive forms of business funding. Although the rates and terms of an MCA may seem reasonable, when you look further (and calculate the APR), you’ll see that rates significantly exceed any other type of financing. Plus, as we mentioned above, even though businesses with lower qualifications can get approved for MCAs, they’ll face the highest rates, which makes it difficult to repay the capital they’ve borrowed.
  • Daily deduction of credit card sales reduces cash flow: Again, although a benefit of merchant cash advances is that payments vary based on your sales, the actual structure of an MCA makes it difficult on a business’s cash flow. Because you’re repaying an MCA so frequently, and directly from your incoming sales, this type of financing significantly impacts your cash flow. Additionally, because of the way a merchant cash advance works, there’s no advantage to repaying your loan early—a perk of many other types of business funding.
  • Easy to end up in a debt cycle: As you may have inferred based on our last two points, it’s very easy to end up in a debt cycle with a merchant cash advance. If you’re a less qualified business in need of financing, an MCA may seem like your only option, but with high fees deducted straight from your cash flow, it can be difficult to repay. Therefore, many borrowers attempt to refinance or add another MCA, which only leads to further financing issues and a risk of default.
  • Confusing contracts and little regulation: Another common problem with MCAs is that due to the way they’re structured—with factor rates, percentages of daily sales, and no specific terms—their contracts can be extremely confusing and business owners may sign them to get funds quickly without fully understanding the agreement. Additionally, because merchant cash advances aren’t technically loans, they don’t face the same regulations as other types of business financing. Historically, this has led businesses to fall victim to misleading sales tactics and advertising, especially from merchant cash advance brokers who approach them promising fast funding and easy approvals.

Qualifications for a Merchant Cash Advance

icon Over $180K
Annual Revenue
Over $180K
icon 550
Credit Score
icon Over 2 years
Time in Business
Over 2 years
*Based on past Fundera customers

How to Qualify and Apply for a Merchant Cash Advance

Ultimately, it’s up to you to determine whether or not a merchant cash advance is right for your business. If you think the fast funding and flexible qualifications outweigh the cost, you’re likely wondering how to start the application process.

First and foremost, you’ll need to find a merchant cash advance company to work with. Due to the lack of regulation in the MCA industry, you’ll want to ensure that the company you choose is trustworthy and reliable. It can be helpful to read company reviews and talk to other business owners who have worked with them.

If you’re looking for a place to start your search, you might consider:

  • Reliant Funding: Offers MCAs up to $400,000 with factor rates varying based on your qualifications
  • Credibly: Offers MCAs (and working capital loans) with factor rates starting at 1.15
  • Kalamata Capital Group: Offers MCAs up to $500,000 with factor rates starting at 1.20

Once you’ve found a company, you should be able to apply online, quickly and easily. The qualifications are typically flexible—even if you have bad credit or little time in business, you’ll likely still be able to get approved for a merchant cash advance.

Generally, MCA companies will look at your credit card processing or bank statements to ensure that you have enough sales volume coming into your business.

Additionally, you might be asked for more traditional business loan requirements, such as:

  • Driver’s license
  • Voided business check
  • Business bank statements
  • Personal and business credit score
  • Personal and business tax returns

Typically, MCAs won’t require collateral; however, some companies may require that you sign a personal guarantee.

All in all, you should be able to complete the merchant cash advance loan application process and receive funds as fast as the same day.

Top Alternatives to a Merchant Cash Advance

If you decide that a merchant cash advance is not right for your business, you’ll want to know where to go next to find financing. Overall, we’d recommend exploring any and all alternatives to MCAs first—as other types of financing will be much more affordable.

This being said, many business owners turn to merchant cash advances because they have bad credit or are new businesses—and they don’t think they can qualify for other products. With the expansion of alternative lending, however, there are a variety of options these businesses can turn to before looking into an MCA. Let’s explore some of those solutions:

Short-Term Loans

Although it may be difficult for some businesses to qualify for a bank loan or long-term loan from an online lender, many lenders are more flexible with their short-term loan products. Like MCAs, these short-term business loans typically have simple applications and can fund very quickly. Unlike MCAs, these loans will have a traditional loan structure with payments over a set period of time. 

Additionally, even though short-term loans may have higher interest rates than some other products, they’ll be much more affordable than a merchant cash advance. Here are some options to consider:

Short-Term Loan Alternatives

Lender Eligibility Criteria Loan Amount Cost and Term Length
One year in business; $100,000 annual revenue; 625 credit score
$5,000 – $250,000
Interest rates start at 27.2%*; terms up to 24 months
Six months in business; $15,000 monthly revenue; 500 credit score
$5,000 – $400,000
Factor rates start at 1.15; Six- to 18-month term

*Interest rates range from 27.2% to 99.9% (based on loans originated in the half-year ending March 31, 2024; minimums provided are rates that at least 5% of customers received).

Business Lines of Credit

Like short-term loans, business lines of credit are another top alternative to MCAs and are often viable options for startups or businesses with bad credit. 

On the whole, business lines of credit are one of the most flexible forms of financing—not only can they be used for any purpose, but they also allow you to draw on a credit line, only paying interest on the funds you draw, not the total amount of your credit line. 

In addition, most lines of credit are revolving—meaning once you’ve repaid what you borrowed, your credit line resets to the original limit. Here are some top business line of credit options to consider as an alternative to a merchant cash advance:

Business Line of Credit Alternatives

Lender Eligibility Criteria Loan Amount Cost and Term Length
Two years in business; $30,000 monthly revenue; 650 credit score
$5,000 – $250,000
4.8% – 51% interest rate; Six- or 12-month term
Idea Financial
Two years in business; $15,000 in monthly revenue; 650 credit score.
Up to $250,000
1.115 – 1.193 factor rate, 12-month term;

1.17-1.296 factor rate, 18-month term

The Bottom Line

At the end of the day, if your business makes a large portion of revenue through debit and credit card payments, you may find that a merchant cash advance is a helpful short-term financing tool—offering an easy application process and fast funding.

In general, however, you’ll want to consider any and all alternative funding options you have before turning to an MCA. As we’ve discussed at length throughout this guide, a merchant cash advance will be one of the most expensive forms of financing out there—with APRs that can reach over 100%.

Therefore, before you look into merchant cash advance companies, start your funding search with some of the options we’ve mentioned, like short-term loans or business lines of credit.

Read More About Merchant Cash Advances