What is a merchant cash advance and how does repayment work?

A merchant cash advance (MCA) is a lump sum advance against your future credit card or debit card sales. Repayment happens automatically — the MCA provider takes a fixed percentage (called a holdback or retrieval rate, typically 10–20%) of your daily card sales until the advance plus fees is fully repaid. On slow days you pay less; on high-revenue days you pay more.

What factor rate should I expect on a merchant cash advance?

MCA factor rates typically range from 1.15 to 1.55. A $100,000 advance at a 1.3 factor rate means you repay $130,000 total. While MCAs don't have traditional interest rates, when converted to APR the effective cost is often 40–150%+. MCAs are best used for short-term needs where the high cost is offset by the revenue opportunity they enable.

What credit score is needed for a merchant cash advance?

Merchant cash advances have among the lowest credit requirements of any business financing product. Many MCA providers approve businesses with personal credit scores as low as 500–550. Approval is primarily based on monthly card sales volume — most providers want to see $10,000+ in monthly card transactions and 3–6 months of consistent processing history.

Merchant Cash Advances

Turn Tomorrow's Sales Into Today's Capital

A merchant cash advance (MCA) gives you immediate capital in exchange for a small percentage of your future daily sales. No fixed monthly payment — repayment flexes with your revenue.

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$5K–$500KTypical Advance Amounts

24–48 HrsAverage Funding Speed

5–15%Daily Holdback Rate

500+Minimum Credit Score

What Is a Merchant Cash Advance?

A merchant cash advance is a lump sum of capital provided to a business in exchange for an agreed-upon percentage of future daily credit and debit card sales, plus a fee. Merchant cash advances are generally structured as purchases of future receivables rather than traditional loans. Their legal and regulatory treatment can vary by jurisdiction and transaction structure.

However, when used strategically for short-term needs, an MCA can be one of the fastest ways to access capital with minimal documentation. If you're using an MCA as a bridge, consider using that window to build your business credit so you can graduate to lower-cost financing options like a business line of credit.

How It Works

1
Apply Based on Your Sales Volume
Share 3–6 months of bank or credit card processing statements. Approval can happen same-day.
2
Receive Your Advance
Accept the offer and receive funds in your bank account within 24–48 hours.
3
Repay Through Daily Sales
A fixed percentage (the "holdback") is automatically withheld from daily card sales until repaid in full.

When an MCA Makes Sense

You need capital in 24–48 hours
Your credit score doesn't qualify for traditional loans
You have strong daily card sales volume
You want payments that flex with revenue (slower months = smaller payments)
Short-term bridge funding while a larger loan — such as an SBA loan — closes

Pros & Cons

Pros

Extremely fast approval and funding
No fixed monthly payment
Low credit score OK
No collateral required
Repayment slows when sales slow

Cons

High cost of capital (factor rates)
Daily deductions can strain cash flow
Stacking MCAs is dangerous
Short repayment terms (3–18 months)

Qualification Requirements

Credit score 500+ (flexible)
At least 6 months in business
Minimum $10,000/month in card sales or bank deposits
No active bankruptcy

Understanding Factor Rates

MCAs use factor rates rather than interest rates. A factor rate of 1.3 means you repay $1.30 for every $1.00 advanced. Example:

Advance Amount	Factor Rate	Total Repayment	Cost of Capital
$50,000	1.20	$60,000	$10,000
$100,000	1.30	$130,000	$30,000
$200,000	1.40	$280,000	$80,000

Illustrative example terms shown for demonstration only. Not an offer or guarantee of financing.

Sources & Further Reading

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