A merchant cash advance (MCA) provides funds in exchange for an agreed amount of future business receivables. It is commonly discussed alongside business cash advances and revenue-based financing, but product names alone do not establish how an agreement works. Read the actual contract and required disclosures.
Funding range
$5,000–$500,000 advertised program range, subject to underwriting.
Business history
At least six months in business under the starting guidelines.
Monthly revenue
At least $25,000, with cash flow and existing obligations reviewed.
How an MCA Differs From a Term Loan
A term loan usually establishes principal, interest, and a repayment schedule. An MCA is structured around a purchase of receivables and a contracted remittance amount. Legal treatment and required disclosures can vary with the agreement and applicable rules. Do not evaluate either product solely by a headline rate or a daily payment.
Factor Rates, Fees and Net Proceeds
A factor rate multiplies the advance amount to calculate a contracted remittance amount before other charges or adjustments. It is not an annual percentage rate (APR). Consider the amount received, how quickly payments are collected, all fees, and any applicable annualized cost disclosure.
Request a written breakdown of origination or administrative charges, broker-related charges if applicable, late or returned-payment fees, default costs, and any early-completion terms. The amount shown on an offer may differ from the amount deposited after fees or prior-balance payoffs.
How Collections Work
Some agreements collect a percentage of sales; others use scheduled bank debits with a reconciliation procedure tied to receivables. Daily, weekly, or other arrangements depend on the program. Do not assume a scheduled debit automatically falls when sales decline. Ask how to request reconciliation, which records are needed, and when a change takes effect.
The advertised estimated collection period is 3–18 months, but actual timing and obligations depend on the agreement and sales. Review what happens during slow periods, weekends, missed collections, account changes, and business closure. Contact the servicer promptly if revenue changes.
Who Should Consider Revenue-Based Funding?
An established business with recurring sales and a defined short-term need may want to compare an MCA with available alternatives. Inventory, a seasonal opportunity, or another permitted business expense may be relevant uses. The expected benefit must justify the cost and frequent cash outflows. An MCA may be unsuitable if the business already struggles to meet routine expenses or existing payments.
Eligibility and Application Preparation
- At least six months operating history and $25,000 in monthly revenue.
- A starting credit score guideline of 500, subject to the complete review.
- A U.S.-based business, active business bank account, and no active bankruptcy under the stated guidelines.
- A signed application and four recent complete business bank statements.
Disclose existing advances, loans, balances, and payment schedules. Additional positions or renewals require review and are not automatic. Identification, ownership records, or additional verification may be requested.
From Application to Funding
- Submit accurate information through the application page.
- Provide documents through the approved secure channel and answer follow-up questions.
- Review net proceeds, remittance amount, fees, collection and reconciliation provisions, security, and guarantees.
- Complete any remaining verification and closing requirements. Funding depends on final approval and processing.
Compare term loans and lines of credit, or discuss your file with our team. For independent context, see the California DFPI's small-business MCA advisory.
Frequently Asked Questions
Is a business cash advance the same as a merchant cash advance?
The names are often used for similar receivables-based funding, but terminology varies. Compare each agreement’s structure, costs, payment collection, and reconciliation provisions rather than relying on the name.
Is a factor rate the same as APR?
No. A factor rate multiplies the advance to calculate a contracted remittance amount. APR includes annualized cost and timing under the applicable calculation method.
Do payments automatically decrease if sales fall?
Not necessarily. A sales split and a scheduled debit operate differently. Review reconciliation rights, required documentation, and the process for requesting an adjustment.
What documents are needed?
Prepare a signed application and four recent, complete business bank statements. Additional records, identification, ownership information, or verification may be requested. Use the team's approved secure channel for financial documents.
How long does an MCA take to complete?
The advertised estimated collection period is 3 to 18 months. Actual timing depends on the contract, collection structure, and sales; review the offer rather than assuming a fixed maturity.
Can I get an MCA with lower credit?
The starting score guideline is 500, but revenue, cash flow, operating history, existing obligations, and verification also affect approval. Lower credit does not guarantee eligibility.
Are liens or personal guarantees required?
Review the proposed agreement. Do not assume that a product described as revenue-based or unsecured has no lien, guarantee, or other security obligation.
Will early completion save money?
A reduced payoff or discount exists only if offered under the agreement or a written payoff arrangement. Paying sooner does not automatically reduce the contracted remittance amount.
Can I renew or apply with an existing advance?
Disclose current balances and payments. A renewal or additional position requires a fresh review of eligibility and overall payment burden.
How fast can funds arrive?
Timing depends on file completeness, verification, approval, and closing or banking requirements. Ask the team for the current estimate for your application.
Availability, pricing, approval, and funding timing depend on the program and underwriting. Review your written offer and agreement before accepting financing.