FAQ's

Merchant Cash Advance FAQ: Everything You Need to Know

Whether you’re a small business owner looking for fast funding or just researching your options, this FAQ will give you a clear understanding of how Merchant Cash Advances work—and whether they’re right for you.

What is a Merchant Cash Advance and how does it work?

A Merchant Cash Advance (MCA) is a type of alternative business financing where a company receives a lump sum of capital upfront in exchange for a percentage of future credit card or daily debit card sales. Unlike a traditional small business loan, there are no fixed monthly payments. Instead, repayment is automatically taken as a percentage of your daily sales—making it a flexible option for businesses with fluctuating revenue.

Is a Merchant Cash Advance a loan?

Technically, a Merchant Cash Advance is not a loan. It’s considered a purchase of future receivables. This means the funder is buying a portion of your future sales rather than lending you money. This distinction allows MCAs to have quicker approval times and more lenient requirements than traditional lenders.

How fast can I get funding with a Merchant Cash Advance?

Most businesses receive funding within 24 to 48 hours after approval. That’s why MCAs are a popular choice for companies that need fast business funding or quick access to working capital due to an emergency, opportunity, or cash flow gap.

Who qualifies for a Merchant Cash Advance?

Generally, to qualify for a Merchant Cash Advance, you should:

• Be in business for at least a year
• Have a steady flow of credit/debit card sales
• Show at least $25,000 in monthly revenue
• Operate a U.S.-based business (most providers require this)

Even if your credit score is low, you may still qualify. That’s why MCAs are often considered small business funding for bad credit.

What are the pros and cons of a Merchant Cash Advance?

Pros:

• Fast approval and funding
• No collateral required
• Flexible payments based on your sales volume
• Lower qualification standards than traditional loans

Cons:

• Higher cost of capital (factor rates typically range from 1.1 to 1.5)
• Frequent repayment withdrawals can affect cash flow

What is the difference between a factor rate and an interest rate?

MCA providers use a factor rate, not an interest rate. For example, if you borrow $20,000 at a factor rate of 1.3, you’ll repay $26,000 total. This fixed repayment amount does not change, even if you pay it off early. Unlike APRs, factor rates do not account for time, so it’s important to compare your financing options carefully.

Can I get a Merchant Cash Advance with bad credit?

Yes. Merchant Cash Advances for bad credit businesses are one of the most accessible forms of financing. Since funders are more concerned with your sales volume and cash flow than your FICO score, many businesses that can’t qualify for a traditional loan may still be approved for an MCA.

Are Merchant Cash Advances available for online businesses or service-based companies?

While MCAs were traditionally for retail and restaurants with high credit card volume, there are now Merchant Cash Advance options for service businesses, eCommerce stores, and online entrepreneurs, as long as you can show consistent revenue and bank statements.

Can I use a Merchant Cash Advance for any business need?

Yes. Funds from a Merchant Cash Advance can be used for inventory, equipment purchases, payroll, marketing, expansion, or to cover seasonal cash flow gaps. There are generally no restrictions on how you use the capital.

How do I choose the best Merchant Cash Advance provider?

When comparing Merchant Cash Advance companies, consider:

• A funder who will answer your questions
• Transparency of terms and factor rate
• Speed of funding
• Customer support and responsiveness
• Whether they report to credit bureaus (if important to you)

Also, be wary of hidden fees or aggressive repayment schedules. A reputable provider will explain everything clearly upfront.