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Merchant Cash Advances

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What Is a Merchant Cash Advance?

A merchant cash advance (MCA) is not a loan. With a merchant cash advance, a financing company provides you with an advance of capital in exchange for a percentage of your daily credit card and debit card sales, plus a fee. In other words, a merchant cash advance is actually a sale of your future debit and credit card sales.

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 down in sales, your payments will also be lower.

Merchant cash advances are usually easy to qualify for (even with bad credit) and fund quickly!

Merchant Cash Advance Details

$10k or more Paid daily or weekly via your merchant or bank account Typically ranges from 1.1 to 1.5 As fast as 24 hours


  • 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


  • Higher fees than most
  • Daily deduction of credit card sales reduces cash flow

How Does a Merchant Cash Advance Work?

Traditionally, merchant cash advances work like this:

  • A MCA financing company offers you a lump sum of cash.
  • You receive that funding and repay it, plus fees, with 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  • Payments are withdrawn automatically from your merchant account until you’ve repaid the full amount, again, plus fees.

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

Now, 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.

Merchant Cash Advance Rates and Fees

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 and higher.

For example, if you receive a $25,000 advance with a factor rate of 1.2, this means you’ll end up paying a total of $30,000, which includes fees worth $5,000. 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%.

Merchant Cash Advance Terms

For merchant cash advance terms, 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.

This being said, because the repayments are based on your sales, the terms of an MCA will vary. In other words, the terms will end up being however long it takes you to repay the total amount you borrowed.

Overall, the average repayment time for a merchant cash advance is eight or nine months—however, the term can be shorter or as long as 18 months, depending on your business. To this point, the higher the fixed percentage of sales you’re paying the financing company with, the shorter your repayment time.

Merchant Cash Advance Cost Example

Let’s walk through an example to get a better understanding of how a merchant cash advance works and perhaps more importantly, how much an MCA costs.

Let’s say, for example, you’re advanced $40,000 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 $40,000 by 1.18, you’ll get $47,200—which is the total amount you’ll need to repay with your daily debt and credit card transactions.

Now, the merchant financing company will be taking 15% of your credit card sales, so the amount that you’ll be paying 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 $50,000 per month in credit card sales. In this case, the financing company is taking 15% of your sales, so if you divide the $50,000 by 30 days in a month, you’ll get approximately $1666 per day, and 15% of $1666 is $250.

So, each day that month you’ll be paying the financing company $250, which, at that rate, means it will take 189 days for you to repay the total amount of $47,200.

Qualifications for a Merchant Cash Advance

Annual Revenue
Over $180K
Credit Score
Time In Business
Over 2 Years

*Based on past Customers

How to Qualify and Apply 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 application process and receive funds as fast as the same day.

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