Merchant Cash Advances
WARNING: Small business owners should be cautious of Merchant Cash Advance (MCA) loans, as they often come with extremely high interest rates and can lead to significant financial strain if not managed carefully.
Merchant Cash Advances (MCAs) are a pricey option that’s available to businesses that have credit or debit card sales. MCAs are probably the most expensive borrowing option, with APRs between 25% – 350%. Usually, they require a minimum daily payment regardless of your sales. Merchant cash advances can usually be approved in a day or two—with very little paperwork. After approval, the loan is repaid with a portion of your future credit card sales each day. Some online only marketplace lenders provide merchant cash advances.
You’ll pay for this convenience in very high interest rates. Merchant cash advances can be a quick way to get the funds you need without collateral (even if you have bad credit), if you are desperate or want to take advantage of a short-term opportunity that requires fast cash. However, relying on merchant cash advances can make it very difficult to manage future cash flow.
An MCA is advantageous for businesses with unsteady cash flow or seasonal business cycles, as it’s not a fixed amount of money demanded each day, but a percentage of your sales. This can also make it hard to calculate the total cost of a merchant cash advance term sheet. Use our Merchant Cash Advance APR calculator to find out what you would be paying on a merchant cash advance.