A merchant cash advance (MCA) is a way to get business funding quickly by selling a portion of your future sales at a discount. Instead of borrowing money and paying interest, you receive a lump sum today and agree to deliver a fixed amount of future receivables back to the funder.
How an MCA works, step by step
- You apply. A short application and your last few months of business bank statements.
- The funder reviews your deposits. Average monthly revenue, consistency, negative-balance days, and any existing advances.
- You receive an offer. It lists the advance amount, the factor rate, the total payback, and the payment schedule.
- You are funded. Money is deposited into your business bank account, often within a business day of signing.
- You repay through scheduled debits. Fixed daily or weekly ACH payments until the total payback is delivered.
What an MCA costs
MCAs are priced with a factor rate rather than an interest rate. Multiply the advance by the factor rate to get the total payback. A $50,000 advance at a 1.30 factor rate means a total payback of $65,000, so the cost of the capital is $15,000.
That cost is fixed when you sign. It does not grow if repayment takes longer, and many offers include a discount for paying early. Because MCAs are short, the equivalent annual percentage rate can be high, which is why it is worth running the numbers in our MCA calculator before you sign.
Who qualifies
MCAs focus on revenue more than credit. Typical requirements are at least 6 months in business, $15,000 or more in monthly deposits, a business bank account, and a credit score of 500 or higher. See the full requirements.
When an MCA makes sense
- You need funds within days, not weeks.
- The money will produce a return larger than its cost, like inventory, a contract, or a critical repair.
- Your revenue is strong but your credit or time in business does not fit a bank.
When to be careful
- Taking several advances at the same time (stacking) can overload your daily cash flow.
- Using an MCA to cover ongoing losses rarely fixes the underlying problem.
- Always ask for the total payback and the estimated APR in writing.
