Merchant Cash Advance FAQ

A merchant cash advance (MCA) is not a loan — it is a purchase of your future credit card receivables or revenue at a discount. You receive a lump sum upfront (typically $5,000 to $500,000), and the provider collects repayment through a fixed percentage of your daily sales. MCAs are popular with small businesses that need fast capital and may not qualify for traditional bank loans. Read our complete MCA guide for a deeper dive.

Here is the basic process: you apply and get approved (often within 24 hours), receive a lump sum deposited into your business bank account, and then repay through automatic daily or weekly deductions from your sales. The total you repay is determined by a factor rate (e.g., 1.25), not an interest rate. So a $50,000 advance at 1.25 means you repay $62,500 total. Use our MCA calculator to model your specific scenario.

Legally, no. An MCA is structured as a purchase of future receivables, not a loan. This distinction matters because MCAs are not subject to usury laws or the same regulations as traditional loans. However, the practical effect is similar — you receive money now and pay more back later. Some states are beginning to regulate MCAs more like loans, requiring APR disclosures.

Most MCA providers fund between $5,000 and $500,000, though some go higher. The amount you qualify for depends primarily on your monthly revenue — providers typically advance 1x to 1.5x your average monthly credit card sales or bank deposits. A business doing $40,000/month in card sales might qualify for $40,000 to $60,000. Take our quiz to see what you might qualify for.

Speed is one of the biggest advantages of an MCA. Most providers can approve and fund within 24 to 72 hours. Some offer same-day funding for straightforward applications. Compare that to SBA loans (30-90 days) or bank term loans (2-6 weeks). Check our provider directory to compare funding speeds.

A factor rate is a decimal multiplier that determines your total repayment amount. Factor rates typically range from 1.10 to 1.50. Multiply your advance by the factor rate to get your total repayment. For example: $30,000 advance x 1.30 factor rate = $39,000 total repayment ($9,000 in fees). Unlike interest rates, factor rates do not compound — your total cost is fixed from day one. Learn more about factor rates.

MCA costs vary widely. The total fee is determined by your factor rate, which typically ranges from 1.10 to 1.50. On a $50,000 advance, that means you repay between $55,000 and $75,000 total. When converted to an equivalent APR, MCAs often fall between 40% and 150%+ depending on the repayment term. Additional fees may include origination (2-5%), ACH return fees ($25-$50), and underwriting fees ($100-$500). See full cost breakdown.

For businesses with strong revenue and 1+ years in operation, factor rates range from 1.15 to 1.30. Newer businesses or those with weaker financials may see rates of 1.35 to 1.50 or higher. The industry average sits around 1.25 to 1.35. Every 0.05 increase adds significant cost — on a $50,000 advance, going from 1.25 to 1.30 adds $2,500 to your total repayment.

Your daily repayment is calculated as a holdback percentage of your daily credit card sales or bank deposits. If your holdback is 15% and you process $2,000 in card sales today, the provider deducts $300. On slower days with $800 in sales, you only pay $120. This variable repayment continues until the full purchased amount (advance x factor rate) is collected, typically over 4 to 18 months.

The holdback (also called retrieval rate) is the percentage of your daily sales that goes toward repayment. Holdbacks typically range from 10% to 25%. A lower holdback means smaller daily payments but a longer repayment period. A higher holdback means faster payoff but more cash flow pressure. For example, a 15% holdback on $3,000 daily sales = $450 deducted per day.

Most MCA agreements allow early payoff, but the savings vary. Some providers offer a 10-20% discount on the remaining balance for early payoff. Others require you to pay the full purchased amount regardless of timing, meaning there is no benefit to paying early. Always ask about early payoff terms before signing — and get it in writing. Learn more about repayment options.

Most MCA providers require a minimum credit score of 500 to 550, though some work with scores as low as 450. Unlike bank loans, your credit score is not the primary factor — revenue is. Providers care more about your monthly sales volume and consistency. That said, better credit scores can help you negotiate lower factor rates. See our bad credit MCA guide.

The standard document package includes: 3-6 months of business bank statements (most important), credit card processing statements, a voided business check, driver's license, and business license or registration. Larger advances ($100K+) may also require 1-2 years of business tax returns. Most providers accept digital uploads, and the entire application takes under 15 minutes. See our full checklist.

It is difficult but not impossible. Most providers require at least 6 months in business with $10,000+ in monthly revenue. Some startup-focused providers will work with businesses as young as 3-4 months old, but expect higher factor rates (1.35-1.50) and smaller advance amounts. If your startup has strong, consistent revenue, your chances improve significantly. Read our startup MCA guide.

No, MCAs are unsecured — you do not need to pledge business assets or real estate. However, most providers require a personal guarantee from the business owner, which means you are personally liable if the business cannot repay. Some agreements also include a general lien (UCC filing) on business assets. This is standard across the industry.

You can sometimes get a second MCA while still repaying the first — this is called MCA stacking. However, it is risky and expensive. Many providers require that your first MCA be at least 50-60% repaid before approving a second. Stacking multiple MCAs can create a dangerous cash flow squeeze where 30-50% of daily revenue goes to repayments. Understand the risks of stacking.

The main risks include: high cost (effective APRs of 40-150%+), daily cash flow drain from holdback deductions, temptation to stack multiple advances, aggressive collection practices from some providers, and personal liability through guarantees. Additionally, MCAs lack the regulatory protections that traditional loans have. Always model worst-case scenarios with our calculator before accepting.

MCA stacking means taking out multiple merchant cash advances simultaneously. It is one of the most dangerous practices in business financing. If you have two MCAs with 15% holdbacks each, 30% of your daily revenue goes to repayments — often leaving too little for rent, payroll, and inventory. Stacking is a leading cause of business distress and should be avoided whenever possible. Learn about safer alternatives.

Before choosing an MCA, consider: SBA loans (6-10% APR, slower but much cheaper), business lines of credit (10-25% APR, flexible draws), invoice factoring (if you have outstanding invoices), equipment financing (for specific purchases), revenue-based financing (similar to MCA but often better terms), and business credit cards (0% intro APR offers). Compare all alternatives here.

Yes, if taken in the wrong circumstances. An MCA can hurt your business if: the daily holdback is too high relative to your margins (leaving you unable to cover expenses), you use the funds for non-revenue-generating purposes, you stack multiple advances, or you take an advance during a revenue downturn. The key question: will this advance generate enough additional revenue to cover its cost? Know when to say no.

Watch for these red flags: pressure to sign immediately, upfront fees before funding, unwillingness to provide written terms, factor rates above 1.50, confession of judgment clauses, vague fee explanations, and no verifiable business address. Always get 3-5 quotes, read the full agreement, and consult an attorney for advances over $25,000. Check our provider directory for vetted companies. See all red flags to watch for.