Merchant Cash Advance

A merchant cash advance (MCA) is an alternative type of business financing that advances a lump-sum payment based on future credit or debit card sales. You’re essentially guaranteeing the advance with future revenue. 

By far, MCAs have one of the highest approval rates compared to other business loans. If your personal credit is not the best or you have defaulted on loans in the past, a merchant cash advance can be a great tool to help re-establish your business and receive the funding you need. 

Approval Rates of Merchant Cash Advance

• MCAs: 90%
• Equipment loans: 87%
• Business line of credit: 76%
• Business loan: 66%
• SBA loan or line of credit: 64%

A merchant cash advance forwards payment to your business against future credit or debit card sales. It’s typically used to increase working capital for businesses and cover cash flow gaps. The advance works like this:

1. Your business receives the cash. You and the financing company agree to the amount your business needs. The funds are dropped in your business bank account.
2. The financing company charges fees. Instead of an interest rate, MCAs typically charge a factor rate that gets multiplied by the entire loan amount. For example, a $100,000 advance with a factor rate of 1.4 would cost a total of $140,000.
3. Your business repays based on future sales. Repayments are often daily, though some MCAs offer weekly payments. The advance is repaid once you pay the borrowed amount plus the factor rate and any other fees.