Resource
What Is a Merchant Cash Advance?
The basics of how an MCA works and how it differs from a traditional loan.
A merchant cash advance (MCA) is a purchase of a business's future receivables in exchange for an upfront lump sum. A funding provider gives a business capital now, and the business repays it by remitting a portion of future sales — typically daily or weekly — until the agreed amount is paid back.
Because it's structured as a sale of future revenue rather than a loan, an MCA isn't priced with an interest rate. Instead, providers use a factor rate — a fixed multiplier applied to the advance amount — to determine the total amount owed. That distinction matters, and it's worth understanding before comparing an MCA to other financing.
Why businesses use them
Businesses often turn to an MCA when they need capital faster than a traditional bank loan can provide, or when they don't have the collateral or credit history a bank typically requires. Approval can move faster because underwriting tends to focus on business revenue and card/bank sales history rather than a lengthy credit review.
That speed and flexibility come at a cost — MCAs are generally a more expensive form of capital than a bank loan, which is why they tend to work best for short-term, specific needs rather than long-term financing.
What to check before accepting one
Before accepting an offer, understand the factor rate, the total payback amount, the payment frequency, and any additional fees. See our Factor Rate Calculator to run the numbers on a specific offer, and Questions to Ask Before Accepting an MCA for a fuller checklist.