Merchant Cash Advance - A merchant cash advance (MCA) is a type of business financing that provides a lump-sum payment to a business in exchange for a percentage of its future credit or debit card sales1 It is not a loan, but a sale of future receivables
An MCA can be a fast and flexible way to get funding for a business that has high credit card sales volume, but it can also be very expensive and risky The repayment terms are usually short (3 to 36 months) and the payments are deducted daily from the business’s bank account or merchant processor
Some advantages of an MCA are:
- approval and funding (as quickly as business day)
- No collateral required
- No minimum credit score required
- Wide range of use for the funds
Some disadvantages of an MCA are:
- High effective rates (30 to 350%+)
- Daily payments can hurt cash flow
- Doesn’t help build business credit
- May lock-in merchant processor
- Only available to businesses that accept debit or credit cards
If you are considering an MCA, you should compare it with other financing options and make sure you understand the terms and costs before signing any agreement
