Merchant Cash Advance: How It Works and What It Really Costs
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A merchant cash advance (MCA) is not a loan — it is a purchase of your future sales at a discount. You receive a lump sum and repay a fixed total (advance × factor rate, typically 1.1–1.5) through daily or weekly deductions. MCAs are the fastest and most accessible funding option, and also among the most expensive: a 1.3 factor rate repaid over 6 months can exceed 100% APR.
At a glance
| Typical amounts | $5,000 – $500,000 |
|---|---|
| Funding speed | Same day – 2 business days |
| Best for | Businesses with strong card sales that need money fast and have been declined for cheaper products. |
Requirements
- 3–6+ months in business
- Consistent card or bank deposits (often $7,500+/month)
- No minimum credit score at many providers
How it works
- Provider reviews 3–6 months of bank/processing statements.
- Offer = advance amount × factor rate (e.g., $50,000 × 1.35 = $67,500 payback).
- Repayment via fixed daily/weekly ACH or a % of card settlements.
- No term in the traditional sense — payback speed depends on sales.
Pros and cons
| Pros | Cons |
|---|---|
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See if you qualify for merchant cash advance
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Check Your Eligibility →Frequently Asked Questions
What is a factor rate?
A multiplier applied to the advance to set total payback. A 1.35 factor on $50,000 means you repay $67,500 regardless of how fast you pay — early payoff usually does not reduce cost.
Is an MCA a loan?
Legally no — it is a sale of future receivables, which is why usury caps often do not apply and why costs can be much higher than loans.
What should I check before signing?
Convert the factor rate to APR for your expected payback speed (use our MCA calculator), confirm whether early payoff discounts exist, and check for a confession of judgment clause.
Related options
- Working Capital Loans — Covering payroll, inventory purchases, seasonal cash-flow gaps, and short-term opportunities.
- Equipment Financing — Trucks, construction machinery, restaurant/medical equipment, manufacturing lines, IT hardware.
- SBA Loans — Established, profitable businesses that can wait for funding and want the lowest payment.