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What Is a Merchant Cash Advance?

Last Updated: July 11, 2019

A merchant cash advance is not technically a loan. With an MCA, a financing company advances you cash in exchange for a percentage of your daily credit card and debit card sales, plus a fee. Merchant cash advances can be quick, easy ways to get a business cash advance with no need for collateral—even if you don’t have a great credit score.

Maximum Advance Amount
$2.5K - $250K
Paid daily via your merchant account
Factor Fee
1.14 - 1.18
Time to Funding
As little as 2 days
  • Quick access to funds
  • Easy approval process
  • Bad credit is accepted
  • Suitable for a wide range of business purposes
  • Higher fees than with traditional loans
  • Less flexibility to change merchant service providers
  • Daily deduction of credit card receipts reduces cash flow
Compared to other loan types
Loan types Max amount Interest rate Speed
Merchant Cash Advance $2.5K - $250K 1.14 - 1.18 As little as 2 days
SBA Loan $5K - $5M Starting at 6% As fast as 2 weeks
Business Term Loan $25K to $500K 7 - 30% As fast as 2 days
Business Line of Credit $10K to over $1M 7% - 25% Under 24 hours (in some cases)
Invoice Financing Up to 100% of invoice value Approx. 3% + %/wk outstanding As little as 1 day
Startup Business Loan $150K 7.9 - 19.9% As fast as 2 weeks
Equipment Financing Up to 100% of equipment value 8 - 30% As fast as 2 days
Short-Term Business Loan $2.5K - $250K Starting at 10% As fast as 1 day
Personal Loan for Business $35K 5.99 - 35% APR As fast as 1 day


Who Qualifies for Merchant Cash Advances?

Would your business be eligible for a merchant cash advance?

If you have little or no collateral, limited business history, or a low credit rating, merchant cash advances could be a solution to your financing problems.

Merchant cash advance providers tend to have easy eligibility standards, so most small businesses shouldn’t have a problem qualifying.


For businesses that make a big portion of their revenue through credit card payments—if you own a restaurant or a retail store, for example—then you can use a merchant cash advance as a short-term financing tool. It can help with working capital, inventory purchases, debt payments, unexpected payments, and more.

See If You Qualify
Most customers who were approved had

**Based on past Fundera customers

Annual Revenue
Over $180K
Credit Score
Time in Business
Over 2 years

How Do You Apply for Merchant Cash Advances?

Applying to a merchant cash advance is a fast and easy process. Because merchant cash advances are paid back with your daily credit card sales, MCA companies will look at your credit card processing statements to make sure you have enough volume coming into the business. Some merchant cash advance companies will ask for your credit score and bank statements, too.

Merchant cash advance applications are almost always online, and applications can be approved the same day you apply. Remember: fast cash is expensive cash, and an MCA is no exception. A merchant cash advance application is fast and easy, but MCAs come with the highest cost of capital on the market.

Documents you need:
  • Driver's License
  • Voided Business Check
  • Bank Statements
  • Credit Score
  • Business Tax Returns
  • Credit Card Processing Statements

How Does a Merchant Cash Advance Work?

Every business could use some extra capital. But applying for loans takes time and energy that you might not have.

Plus, even after you send out an application, there’s a chance you don’t even qualify.

At Fundera, we pride ourselves on having a marketplace that can help out all different sorts of business owners. If you don’t have the time to wait for a typical loan or wouldn’t qualify, a merchant cash advance might be for you.

Merchant Cash Advance: The Fundamentals

How would you like a cash advance—approved and funded in just a day or two—with almost no paperwork involved?

That’s what a merchant cash advance is, with one caveat:

In return for that lump sum advance, you agree to pay the lender back with a percentage of your daily credit card sales. For this reason, MCAs typically make sense for businesses that get most of their revenue from credit card and debit card sales (but you don’t have to get all your revenue this way in order to qualify for a merchant cash advance).

How does it work in practice?

Well, with most types of MCAs, a provider will offer you a lump sum of cash in exchange for a slice of your daily credit card and debit card sales. Typically the MCA is paid back by remitting that percentage of your sales from your bank account—through ACH (Automated Clearing House) withdrawals. As merchant cash advance providers can just plug into your bank account or credit card processor, they can be easy-to-access, quick products.

While a merchant cash advance is definitely one of the faster financing options out there, it is the most expensive loan on the market.

Merchant Cash Advances & Factor Rates

Merchant cash advance providers measure their fees with a factor rate instead of an interest rate.

Ranging from 1.14 to 1.48 typically, a factor rate is what you multiply your loan amount by to figure out the total you’ll owe.

Converted to APR, these rates often start at 15% but can get all the way up to triple digits.

Merchant cash advances can get so expensive for a few different reasons. The most important reason is that merchant cash advances tend to work for riskier borrowers—those with lower credit scores or those with newer businesses. And riskier lending options correlate with higher rates and fees.

How Long Will It Take To Pay Off a Merchant Cash Advance?

The average repayment time frame for a merchant cash advance is 8 or 9 months.

But the term can be as short as 4 months and as long as 18, depending on your business.

And the higher the fixed percentage of your credit card sales you’re paying the lender with, the shorter your repayment time—and the tighter your cash flow.

Is a Merchant Cash Advance Is Worth It?

How do you know whether a merchant cash advance will make sense?

On the one hand, paying off a loan with daily credit card sales can bite into your cash flow more than you might expect.

On the other, you’ll actually repay a smaller amount of money during slower weeks and months—unlike with a term loan, where you’ll either make your payments on time or suffer the late fees.

There are other reasons why some borrowers might want to opt for a merchant cash advance rather than a more traditional business loan.

For one, merchant cash advances come unsecured—meaning you don’t have to offer a valuable piece of collateral in exchange for the loan. This can be a benefit for business owners who don’t want to put something like their personal home or financial assets at risk.

And finally, merchant cash advances are quick. Need cash this week? A merchant cash advance can probably be approved by then.

These two advantages correlate with high costs, though. So when it comes down to it, it’s up to you to understand your business’s financials. Just remember that a merchant cash advance is the most expensive financing option you could pick.

What Will a Merchant Cash Advance Cost?

We’ve said it over and over: A merchant cash advance can be very expensive. And based on the structure, taking on an MCA can really take a chunk out of your cash flow.

But let’s look at how you can calculate the actual cost of a merchant cash advance.

A Cost Example of Merchant Cash Advances

Say you’re advanced $20K with a factor rate of 1.18.

$20K multiplied by 1.18 is $23,600, which is what you’ll need repay with your daily credit card transactions.

At first glance, that might seem like you’re just paying a 18% interest rate—but looks can be deceiving.

You have to determine the true cost of the merchant cash advance by its APR.

If your lender will be taking 15% of your future credit card sales and you’re estimating $25K a month in credit card transactions, you’d repay that advance in 189 days with daily payments of $125.

That’s an APR of 65.96%—quite a bit higher than it originally looked.

When is the Cost Worth It?

Merchant cash advances, while fast and convenient, tend to be worth their price only if you’re confident you can repay them quickly and without much harm done to your cash flow.

Just be sure to shop around and see if you can qualify for other types of loans before moving forward with a merchant cash advance.

Editor's Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone.