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Merchant Services For Your Business

Merchant Cash Advances: The Capital Necessary to Succeed

Take your business to the next level with a fair and reasonable cash advance

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Expand Your Business

More and more frequently, businesses are choosing to use a merchant cash advance (MCA) for stimulating growth – whether that’s opening a new branch of a successful store, or simply upgrading their existing equipment to make work more efficient.

An MCA can help kickstart your expansion into new markets, or even further establish yourself in your industry. Sometimes all it takes is a little money to get things rolling.

Here is how an MCA actually works. It is not a loan: the provider buys a share of your future sales at a discount. You receive a lump sum up front, then repay it either through a holdback (a fixed percentage of your daily card sales) or through fixed daily or weekly ACH debits from your bank account. With a holdback, payments rise and fall with your sales; with fixed debits, the amount stays the same whether business is strong or slow.

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Get The Funds You Need Now

If you’re operating an established business and need to quickly build capital, a merchant cash advance could be exactly what you’re looking for. However, they’re not for everyone – so it’s best to understand the difference before diving in headfirst.

Note: If you’re a startup with no credit history, you’ll need to look into other methods. Generally speaking, advances are reserved for companies that have proven themselves profitable over (at least) a brief period of time. However, getting a merchant cash advance with bad credit is still possible.

Approval is based mainly on your revenue, not your credit score. Providers typically look at your monthly card and bank deposits and how long you have been in business, and funding can arrive within days. Have ready: your last several months of bank statements, recent processing statements, owner ID, and business registration. Clean, consistent deposits get you better offers.

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Pros of a Merchant Cash Advance

There are several benefits to using an MCA as a business owner:

1. No collateral (unlike a traditional bank loan)

2. Fast (you’ll receive your advance within 24-48 hours of being accepted)

3. No fixed monthly payments (great for companies driven by seasonal business)

4. One alternative if you don’t qualify for a loan

One more advantage worth knowing: with a holdback structure there is no fixed monthly payment and no set term, so a slow month means a smaller payment rather than a missed one. That flexibility is why seasonal businesses often prefer a split-based MCA over a fixed-payment loan.

ST. PETERSBURG, RUSSIA - MARCH 31, 2017: Growing lettuce in the greenhouse of agricultural company Vyborzhets. The company supplies fresh vegetables to the city all year round

The Cons of Using One

With those benefits come a handful of less desirable characteristics:

1. Higher APR than a standard loan

2. You’re tied to the same processor until your contract is over (this could be anywhere from 4 months to 1.5 years depending on the terms of your contract)

3. Possibility of legal trouble for merchants trying to push cash sales instead of letting payments occur naturally

 

The real cost is easiest to see through the factor rate. Borrow $50,000 at a factor of 1.3 and you repay $65,000. Because that is repaid over a few months rather than years, the effective annual cost can be far higher than a bank loan. Watch for two other traps: stacking (taking a second advance before the first is repaid, which can choke cash flow) and contract clauses such as confessions of judgment or heavy default fees. Read every term before you sign.

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Is a Cash Advance Right for You?

At the end of the day, you’ll have to sit down and weigh your options if you need additional funding for your business venture. A merchant cash advance is just one way of making it happen (albeit an increasingly popular one).

Before you pull the trigger on anything, it’s a good idea to evaluate what’s the best fit for your company.

Between loans, advances, private equity, crowd funding, and even asking family and friends, there are ways out there to get your hands on cash. If an MCA is what you decide on, we got you covered.

Disclosure rules now help you compare. California (since 2022) and New York (since 2023) require providers to disclose an estimated annual percentage rate and the total cost of financing, and other states are following. Before you accept any offer, compare the factor rate, the holdback percentage or fixed payment, the total payback amount, the estimated APR, and whether early payoff earns a discount.

If a traditional loan might fit better, compare your options in our guide on how to get a business loan.

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Motile

Merchant Services For Your Business