# Merchant cash advances

Source: https://businessloanbroker.ai/business-loans/merchant-cash-advance/
Site: BusinessLoanBroker.ai (powered by Levr)

> A merchant cash advance is an advance on future sales repaid daily or weekly at a factor rate of 1.1 to 1.5. What it really costs in APR and when it fits.

A merchant cash advance, or MCA, is a lump sum repaid from a fixed share of your future card sales or bank deposits, taken daily or weekly. It is priced with a factor rate of roughly 1.1 to 1.5, so $50,000 at 1.35 means you repay $67,500. It funds in one to three days and approves businesses with weak credit. Converted to APR, it is the most expensive financing on this site, often above 100%.

## Key facts
- **Amounts:** $5,000 to $500,000, occasionally more; usually 50% to 150% of monthly revenue
- **Typical cost:** Factor rate 1.1 to 1.5; roughly 40% to over 200% APR depending on how fast you repay
- **Terms:** 3 to 18 months, repaid daily or weekly
- **Time to fund:** 1 to 3 business days
- **Minimums most lenders use:** 3 to 6 months in business, $10,000 a month in revenue, 500 credit score

## What is a merchant cash advance?

Legally an MCA is a purchase of your future receivables, not a loan. The funder gives you cash now and takes a fixed percentage of each day's card sales, called the [holdback](https://businessloanbroker.ai/glossary/holdback/), until the agreed total is collected. A newer version pulls a fixed daily or weekly amount from your bank account by ACH instead.

Because it is a sale rather than a loan, usury laws in most places do not apply and the cost is quoted as a [factor rate](https://businessloanbroker.ai/glossary/factor-rate/), not an interest rate. Payments shrink when sales slow on a true holdback advance; on a fixed ACH advance they do not.

## Who qualifies for a merchant cash advance?

Almost any business with consistent deposits. Funders typically want three to six months in business, $10,000 or more a month in card or bank revenue, and an owner credit score of 500 or higher. Profit, tax returns and collateral are rarely checked. Restaurants, retail, salons and auto repair are the core markets.

- Declined most often: businesses with more than three to five negative balance days a month, bank accounts showing other active advances the funder considers too many, or recent defaults on another MCA.
- If you have been declined elsewhere, [what to do when the bank says no](https://businessloanbroker.ai/situations/bank-said-no/) lists cheaper options to try before an MCA.

## What does a merchant cash advance really cost?

A typical example: you take a $50,000 advance at a factor rate of 1.35, so you repay $67,500. The funder sets a daily payment of about $480 over roughly 140 business days, about seven months. The fee is $17,500. Because you are paying it back over seven months, not a year, and the balance falls daily, the APR is roughly 110%.

Pay it off in four months and the APR is higher still, since the fee does not shrink. Add an origination fee of 2% to 5% and a prepayment discount that rarely applies. Run your own offer through the [MCA true cost calculator](https://businessloanbroker.ai/tools/mca-true-cost-calculator/) before you sign.

## How do you qualify, and what documents do you need?

Three to six months of bank statements, three months of card processing statements if the holdback is card based, your formation documents, a voided check and a government ID. That is usually the whole file, which is why approvals come in hours. Larger advances may add a tax return or a landlord contact.

Our [document checklist](https://businessloanbroker.ai/guides/document-checklist/) covers everything. Before you apply, read your bank statements the way the funder will: they are counting deposits, negative days and existing daily withdrawals. Three existing advances in your statements is a decline almost everywhere, and a fourth is how businesses fail.

## How long does a merchant cash advance take?

Typically one to three business days from application to money in your account, and often same day for smaller amounts. Underwriting is automated from your statements, and the contract is signed electronically. Some funders require a short verification call with you and sometimes your landlord.

Speed is the product's real advantage, and it is the reason owners accept the cost. If you have more than a week, nearly every option on [fast funding](https://businessloanbroker.ai/situations/fast-funding/) is cheaper. If you have 48 hours, an MCA and an invoice financing draw are often the only products that close.

## When should you choose something else?

Choose a [short term loan](https://businessloanbroker.ai/business-loans/short-term-loans/) if you qualify, because the same money usually costs half as much with a fixed end date; our [MCA versus term loan comparison](https://businessloanbroker.ai/compare/mca-vs-term-loan/) works the numbers. Choose [revenue based financing](https://businessloanbroker.ai/business-loans/revenue-based-financing/) if your revenue is recurring and you need a larger amount over a longer period.

Never take an MCA to pay another MCA. Stacking advances is the most common way a profitable business ends in default, because the combined daily draws exceed the gross margin. If you are already stacked, look at [refinancing business debt](https://businessloanbroker.ai/situations/refinance-business-debt/) before anything else.

## How do you apply for a merchant cash advance?

Apply once on this site and your application reaches MCA funders alongside short term lenders, lines of credit and invoice financing, so you see every cheaper offer you qualify for next to the fast one. It is free for your business, and we are paid the same whichever lender you choose. You can also ask your AI assistant to apply through our [MCP server](https://businessloanbroker.ai/agents/); it reads your statements, fills the application and submits it.

| Option | Amounts | Typical cost | Speed | Best for |
|---|---|---|---|---|
| Merchant cash advance | $5,000 to $500,000 | Factor rate 1.1 to 1.5, often over 100% APR | 1 to 3 days | Weak credit, card heavy sales, 48 hour needs |
| Short term loan | $5,000 to $500,000 | 30% to 80% APR | 1 to 3 days | Fixed payment with a set end date |
| Revenue based financing | $50,000 to $5M | 1.1x to 1.5x cap | 1 to 4 weeks | Recurring revenue, larger amounts |

## Questions and answers
**Is a merchant cash advance a loan?**

No. It is structured as a purchase of future receivables, which is why it is not covered by most lending laws and is priced with a factor rate instead of an interest rate. You still sign a personal guarantee in most contracts, so the practical risk to you is similar to a loan.

**What is a confession of judgment?**

A clause in some MCA contracts that lets the funder obtain a court judgment against you without a trial if you miss payments. Several states have restricted them, but they still appear. Do not sign one without a lawyer reading it.

**Can I pay off an MCA early?**

You can, but the full agreed total is usually still due, so there is no interest saving. Some funders offer a prepayment discount of a few percent if you pay within the first 30 to 60 days. Ask for the discount schedule in writing.

**What happens if sales drop?**

On a true holdback advance, your daily payment drops with sales, and the term stretches. On a fixed ACH advance, the payment does not change. Many contracts let you request a reconciliation to lower the payment; ask how it works before you sign.

## Related
- [Short term business loans](https://businessloanbroker.ai/business-loans/short-term-loans/)
- [Revenue based financing](https://businessloanbroker.ai/business-loans/revenue-based-financing/)
- [Merchant cash advance versus term loan](https://businessloanbroker.ai/compare/mca-vs-term-loan/)
- [Merchant cash advance true cost calculator](https://businessloanbroker.ai/tools/mca-true-cost-calculator/)
- [Factor rate](https://businessloanbroker.ai/glossary/factor-rate/)

## Apply
Apply for the business: https://apply.businessloanbroker.ai/signup?utm_source=direct&utm_medium=organic&utm_content=md-merchant-cash-advance
MCP server for AI agents: https://mcp.businessloanbroker.ai/mcp (docs: https://businessloanbroker.ai/agents/mcp/)