When and How to Put Merchant Cash Advances to Work for You

Question: When is a loan not a loan? Answer: When it’s a merchant cash advance.

With MCAs, financing companies provide immediate cash to businesses based upon the company’s level of credit card activity. The lender makes its money by claiming a percentage of sales, on top of an activation fee. The advantage of such funding is its exceptional speed and ease of acquisition, as well as remaining a valid option for those hampered by low credit scores.


Still, not everyone can be authorized for an MCA. You need proof of annual revenue over $180,000 and you must further have been in operation for at least two years. Moreover, while low credit ratings remain acceptable, any score beneath 550 will be rejected.


When acquiring a merchant cash advance, your credit card processing statement is the most critical document. This allows the financier to determine whether the volume of transactions your company produces makes the risk on their behalf worthwhile. You will likewise need to provide tax returns, a valid driver’s license and a voided business check. After applying, expect your bank statements to be scrutinized.

Because MCA applications are commonly handled online, they can possibly be approved within as little as a day. Compare that with the long waits accompanying typical loans. Amounts requested are delivered in single, lump-sum payouts.


Once an MCA has been accepted, your bank account becomes linked with an Automated Clearing House until the debt is paid off. This means a percentage of every credit card transaction is instantaneously deducted. Rather than paying interest as you would with a traditional advance, MCA fees are measured by what’s known as a factor rate. Factor rates, sometimes called “buy rates”, are calculated by analyzing numerous variables, including sales stability, average credit card sales, how long you have been in operation and your particular market.

This figure is then multiplied by the sum of the advance to determine how much is owed. Amounts occasionally start as low as 15% but can rise to triple digits under certain instances. On average, MCAs take eight or nine months to pay off but may range anywhere from four to 18.


Accepting a merchant cash advance only makes sense depending upon how badly you require assistance. Although paying a loan attached to customer interactions can significantly reduce gross income, MCAs allow you to relax during slow periods since payment size is forever linked with sales volume. Additionally, these offers come unsecured, meaning you’ll never have to put up collateral.

When you need fast, easy-to-obtain cash, an MCA could be the ideal choice. Beware, however, of the exorbitant costs attached to these financial instruments.