FAQ's
What Is a Merchant Cash Advance and How Does It Work?
A Merchant Cash Advance, often called an MCA, provides your business with a lump sum of capital upfront. In return, the funding company purchases a portion of your future sales.
Instead of fixed monthly payments, repayment is collected automatically as a percentage of your daily credit or debit card sales. When sales are higher, payments are higher. When sales slow down, payments adjust accordingly. That flexibility makes it appealing for businesses with fluctuating revenue patterns.
Is a Merchant Cash Advance a Loan?
No. A Merchant Cash Advance is not technically a loan.
It is structured as a purchase of future receivables. This means the funding provider buys a percentage of your projected sales rather than lending money with interest. Because it is not classified as a traditional loan, approval processes tend to be faster and qualification standards are often more flexible than bank financing.
How Quickly Can I Receive Funds?
Speed is one of the main reasons businesses choose an MCA.
In many cases, once approved, funding can be deposited within 24 to 48 hours. This makes it a strong option for businesses facing urgent expenses, time-sensitive opportunities, unexpected repairs, or short-term cash flow gaps.
What Are the Basic Qualification Requirements?
While requirements vary by provider, most businesses typically need to meet the following :
- At least 6 months in operation
- Consistent daily or monthly revenue
- Minimum monthly revenue thresholds of at least $25,000
- A U.S.-based business bank account
Credit score is usually not the primary factor. Providers are more focused on your current revenue consistency and cash flow strength.
What Are the Advantages of a Merchant Cash Advance?
Some common benefits include:
- Fast approval and fast funding
- No collateral required in most cases
- Payments tied to daily sales activity
- More accessible for businesses with lower credit profiles
The biggest advantage is flexibility, especially for businesses with uneven monthly revenue.
What Are the Potential Drawbacks?
There are also important considerations:
- The total cost of capital can be higher than traditional financing
- Payments are typically collected daily or weekly
- Factor rates can feel confusing if not explained clearly
Business owners should understand the total repayment amount before accepting terms.
What Is a Factor Rate and How Is It Different From an Interest Rate?
MCAs use a factor rate instead of a traditional interest rate.
For example, if you receive $20,000 at a factor rate of 1.3, your total repayment will be $26,000. This amount is fixed from the beginning. It does not decrease if you pay early, and it is not calculated over time like APR.
Because factor rates do not reflect time-based cost the way interest does, it is important to look at the total repayment amount and estimated repayment timeline.
Can I Qualify With Bad Credit?
Yes, in many cases.
Merchant Cash Advances are often available to businesses that may not qualify for traditional bank loans. Providers typically evaluate revenue flow and transaction volume more than FICO score. That makes this option accessible for businesses rebuilding credit or with limited credit history.
Are MCAs Only for Retail and Restaurants?
Historically, MCAs were most common in restaurants and retail businesses with strong credit card volume.
Today, they are available for service businesses, eCommerce companies, online sellers, contractors, and many other business models, as long as consistent revenue can be demonstrated through bank statements.
How Can the Funds Be Used?
One advantage of a Merchant Cash Advance is flexibility in use.
Business owners can typically apply funds toward:
- Inventory purchases
- Equipment upgrades
- Payroll
- Marketing campaigns
- Emergency expenses
- Expansion initiatives
- Seasonal cash flow gaps
There are generally no restrictions on how the capital is used.
How Do I Choose the Right Merchant Cash Advance Provider?
Not all providers operate the same way. Consider these factors when comparing options:
- Clear explanation of terms and total repayment
- Transparent factor rate disclosure
- Realistic sales projections
- Responsive communication
- No hidden processing or administrative fees
Ask direct questions. A reputable provider should explain repayment structure, estimated timeline, and total cost clearly before you sign anything.
