Merchant Cash Advance

Merchant cash advances provide small businesses with an alternative from traditional bank loans. Business owners receive funds as a lump sum upfront from a merchant cash advance provider and repay the advance with a percentage of the business’s sales.

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Merchant Cash Advance Details

LOAN AMOUNTS

$2,500 – $500,000

INTEREST RATES

10 – 350% APR

REPAYMENT TERMS

3 – 36 months

TURNAROUND TIME

1 – 7 days

Pros

  • Fast access to cash
  • Flexible repayment terms
  • Strong credit not required
  • You choose how to use
  • No collateral required

Cons

  • Very, very expensive (70% – 200% APR)
  • Minimum daily payment hurts cash flow
  • Doesn’t help build business credit
  • May lock-in merchant processor
  • Must accept credit cards

A merchant cash advance is not a business loan but should be considered a cash advance based on the volume of your credit card receipts. The funding provider gets paid back by taking a portion of your future credit card sales each day. You can usually get approved in a day or two—with very little paperwork. But you’ll likely pay for this convenience in higher interest rates. Because this option is more expensive than some other options, it’s a good way to take advantage of a short-term opportunity that requires fast cash, but it can become very expensive if you’re looking for money to bail you out of a financial bind. You don’t want to get in the habit of relying on merchant cash advances since its higher cost can make it very difficult to manage future cash flow.

Get to know Merchant Cash Advance

Gerri Detweiler • October 21, 2020

What is a Merchant Cash Advance (MCA)?

Merchant cash advances provide small businesses with an alternative to other financing, like traditional bank loans. Business owners receive funds as a lump sum upfront from a merchant cash advance provider and repay the advance with a percentage of the business’ sales. An MCA can be an option for businesses that have high credit card sales volume, need funding quickly, or may not qualify for a traditional loan.

Note:

A Merchant Cash Advance is only available to those businesses that process credit cards for payment. If your business doesn’t take credit cards, an MCA will not be available to you.

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Merchant Cash Advance Companies

There are a number of companies offering merchant cash advances, and not all are created equally. Some are more prepared to cater to bad credit, others may offer higher limits. Here’s a breakdown for you to help you determine which might be a good fit for your small business.

Credibly

Another option for startup businesses, Credibly allows small businesses with six months in operation and $15,000 in monthly revenue to qualify. They can also get you funding in 48 hours, making it an even quicker option than a traditional loan or even other merchant financing or merchant advance financing, as well. They charge a 2.5% origination fee and their factor rates bring in higher APR, as well, but it can be a good option for a high-performance startup.

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Rapid Finance

Get the working capital you need to grow fast with a business cash advance from Rapid Finance. In under 72 hours you can have $5,000-$600,000 in your account to help get your business running. A quick application, no business lien, and no application fee make this an attractive option for anyone looking for money fast. However, the application isn’t completely digital, and your costs will depend on your risk profile.

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National Funding

Merchant cash advances usually come with an origination fee, not so with National Funding. While small business owners will still face higher interest rates typical of a merchant advance, National Funding has some one of the lower thresholds for approval for this type of business funding.

Can Capital

It’s difficult for business owners with bad personal credit or a thin business credit profile to get a small business loan, and even more difficult for newer business owners. Can Capital helps bridge that gap, allowing businesses with $4,500 in monthly credit card sales and six months in business to qualify. Be warned, however, their repayment terms are short and higher factor rates result in a higher APR than normal.

Fora Financial

Another option for startups, Fora only requires six months in business, but has high revenue requirements and an origination fee, unlike National Funding. Despite the high APR and revenue requirements, Fora offers up to $500,000 for a merchant cash advance, much higher than other competitors in the merchant advance game.

American Express Merchant Financing

Not technically a merchant cash advance, American Express Merchant Financing is a short-term loan for businesses that accept American Express credit card payments. If you fall under this category and have held a American Express business credit card for over a year, this could be a much less expensive alternative to a merchant advance.

Fundbox

Perhaps the best option for applicants with bad credit, Fundbox doesn’t actually offer a merchant cash advance, but their lines of credit are a great alternative for borrowers with bad credit. Merchant cash advances traditionally have lower approval thresholds, and Fundbox’s line of credit falls right in line. Borrowers can qualify with a personal credit score of just 500.

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