Merchant Cash Advances: A Quick Solution for Business Owners

April 15, 2024

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As a small business owner, you may sometimes need quick access to working capital to cover short-term expenses or seize new opportunities. Bank loans, while helpful, can be time-consuming and may require a good credit history. A merchant cash advance (MCA) is an alternative funding option that provides immediate cash in exchange for a percentage of future revenue.

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What is a Merchant Cash Advance (MCA)?

A merchant cash advance is a type of business financing where a business owner receives a lump sum upfront in exchange for a portion of future sales. MCA providers offer this funding solution for small businesses that might not qualify for bank loans or lines of credit. It is important to note that an MCA is not a loan, as the repayment* is based on daily sales and does not require real estate collateral or a fixed payment schedule.

How Does a Merchant Cash Advance Work?

A merchant cash advance (MCA) is a financing option where a business receives an upfront lump sum of cash in exchange for a percentage of its future credit card sales. It’s designed to provide quick access to working capital, especially for businesses with inconsistent cash flow or those that don’t qualify for loans.

Here’s how it works: the MCA provider advances a certain amount of money to the business, based on its average revenue. The business then agrees to repay the advance, plus a predetermined fee to the MCA provider.

The repayment continues until the entire advance and the agreed-upon fees are paid. Since the repayment amount is based on a percentage of sales, it can fluctuate with the business’s sales volume, providing flexibility during slow periods (when revenue decreases, so do your payments).

Advantages of Merchant Cash Advances

Quick and Easy Application Process

The application process for an MCA is generally faster and less cumbersome than applying for a bank loan. Many MCA providers offer online applications and require minimal documentation, usually just 3-4 months of business bank statements. Approval is usually granted within 24 hours, allowing business owners to access funds quickly.

Suitable for Businesses with Bad Credit

Merchant cash advances (MCAs) are often considered suitable for businesses with bad credit for several reasons:

  1. Minimal business credit requirements: MCA providers typically focus on the business’s sales history and cash flow rather than the owner’s credit score. This makes it easier for businesses with poor credit history to qualify for an MCA.

  2. Businesses don’t need to provide real estate collateral to secure the advance. This can be beneficial for business owners who may not have valuable assets or those who are hesitant to put their personal or business assets at risk.

  3. Fast access to capital: Since the approval process for an MCA is less stringent than bank financing options, businesses can often receive funds within a few days. This can be crucial for businesses with poor credit that need immediate cash to cover expenses, address emergencies, or seize growth opportunities.

  4. Flexible repayment: MCAs are repaid as a share of sales, which means the repayment amount adjusts based on the business’s sales volume. This flexibility can be helpful for businesses with inconsistent cash flow or seasonal fluctuations, as it reduces the burden during slow periods.

Flexible Repayment Terms

Repayment terms for merchant cash advances are flexible and depend on your business’s daily sales. This means that during slow periods, your repayments will be lower, providing relief to your cash flow.

Comparing MCAs to Other Financing Options

Merchant Cash Advance vs. Small Business Loans

Unlike business loans, merchant cash advances do not often require real estate collateral, have flexible repayment terms, and prioritize credit card sales over credit scores. With this form of business funding, you’ll pay a factor rate and a daily or weekly payment. On the other hand, business loans have fixed interest rates and require regular monthly payments. Contrastily, lenders of loans also often require high business credit scores for consideration on a term loan. This is especially true of SBA loans.

Merchant Cash Advance vs. Line of Credit

A line of credit offers businesses access to a predetermined amount of funds to be drawn upon as needed. Interest is only charged on the amount used, and once repaid, the credit line is replenished. Lines of credit often have lower interest rates than MCAs and can be a more cost-effective solution for businesses with a good credit history.

However, an MCA may be a more suitable option for businesses with poor credit or fluctuating cash flow. Merchant cash advance providers care more about seeing consistent revenue when reviewing your bank account history than a high credit score.

FAQs About Merchant Cash Advances

Are merchant cash advances suitable for all businesses?

MCAs can be for any business, but are best suited for businesses with a high volume of credit card transactions and debit card sales, such as retail stores, restaurants, and e-commerce businesses.

How much funding can I get through a merchant cash advance?

The advance amount you receive depends on your average monthly revenue and the percentage of future sales you agree to allocate to the MCA provider. Typically, small businesses can receive advances ranging from a few thousand dollars up to several hundred thousand dollars.

What are the eligibility requirements for a merchant cash advance?

Eligibility criteria for merchant cash advances vary among providers, but common requirements include:

  • A minimum number of months in business, often ranging from 3 to 12 months

  • A minimum monthly revenue

  • Proof of revenue demonstrated through business bank account statements

While credit scores are not the primary focus, some MCA providers may still have minimum credit score requirements.

Can I get a merchant cash advance with poor credit?

Yes, many MCA providers cater to small business owners with poor credit, as they focus more on your business’s revenue. However, businesses with poor credit may receive higher factor rates, increasing the total cost of the advance.

How long does it take to repay a merchant cash advance?

Repayment periods for merchant cash advances vary based on your daily revenue. Generally, repayment periods can range from 3 months to 24 months. Since repayments are tied to your sales, the repayment period may be longer during slow periods.


A merchant cash advance can be a quick and accessible funding solution for small business owners, particularly those with poor credit. While MCAs offer flexible repayment terms and a faster approval process than loans, weighing the total cost and other financing options is essential. Carefully considering your business needs and the various funding options at your disposal will help you make the best decision for your business’s financial health.

*Repayment in this context describes the process of repurchasing a merchant cash advance. It does not describe the process of repaying a loan. MCAs are legally distinct from loan products.

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