Most businesses need a little financial boost from time to time. The thing is, not all businesses can get (or need) a business loan. A merchant cash advance (MCA) provides an alternative funding source for those who might not qualify for conventional lending solutions. Here’s what you need to know about getting one for your business.

What Is a Merchant Cash Advance?

A merchant cash advance is an alternative to a conventional business loan. While it’s not an ideal solution for everyone, it can be a good option for those who get a significant amount of their revenue from debit and credit card sales. It’s not a loan. Instead, it’s an advance on your future sales, which you repay (plus a fee) daily or weekly. While they’re known for higher APRs, MCAs can provide a faster, easier funding solution for businesses in need of quick cash or that don’t have the best credit.

How Does an MCA Work?

With an MCA, you receive a lump sum of money from an MCA financing company. You repay the funds you get plus a set fee directly from your daily or weekly credit and debit card sales. The amount you repay is typically a percentage of your sales. So, the more you earn, the more you pay (and the faster you repay your advance). On the other hand, slower days mean lower payments.

How Much Does an MCA Cost?

Instead of an interest rate, an MCA financing company assigns you what’s known as a factor rate. Rates typically range from 1.14 to 1.48. The factor rate gets applied to the amount you borrow, and it helps determine the total amount you need to repay. For instance, if you request $35,000 and you get a factor rate of 1.3, you’ll actually need to pay back $45,500. Some MCA financing companies do charge additional (often called administrative) fees, so be sure that you know exactly what you’ll be responsible for repaying before you sign anything.

What Are the Pros and Cons of an MCA?

If you’re on the fence about an MCA, consider the pros and cons:


  • Easy application and approval
  • Faster funding
  • You can use the funds for almost anything
  • Repay based on your sales


  • Higher fees
  • Deductions from sales can reduce cash flow
  • Easy to get into a debt cycle
  • Potentially confusing contracts

If a significant portion of your revenue comes from credit and debit card sales, a merchant cash advance may be a good financing option to consider. As with any type of funding, compare your potential solutions carefully to determine the best one for you.