What is a merchant cash advance?
An MCA is commercial funding tied to future business receivables. A provider purchases an agreed amount of future receivables for a discounted purchase price. Many offers use a factor rate to express the purchased amount rather than a conventional interest rate.
Example: $50,000 at a 1.35 factor rate produces a $67,500 purchased amount before any separately disclosed fees.
How the process works
- Complete the application.
- Upload recent business bank statements and supporting documents.
- Underwriting reviews revenue, deposits, balances, existing obligations, time in business and other risk factors.
- Qualified businesses may receive proposed terms.
- Final verification and contracts are completed before funding.
Common requirements
| Factor | Why it matters |
|---|---|
| Revenue | Helps estimate capacity to support remittance. |
| Deposit consistency | Shows stability of business cash flow. |
| Negative days / NSFs | Can signal cash-flow stress. |
| Existing positions | Reduce available operating cash flow. |
| Time in business | Shows operating history. |
| Credit profile | May affect risk and terms even when not the main factor. |
Factor rates and cost
Multiply the funded amount by the factor rate to estimate the purchased amount. Then identify fees, any payoff deductions and the expected remittance. Gross approval is not always the same as net cash received.
Existing MCAs, second positions and consolidation
Adding another daily or weekly payment can create severe cash-flow pressure. Evaluate combined payment burden, not just new cash received. A renewal, refinance, consolidation or reverse-consolidation structure may be more appropriate in some cases.
When an MCA can fit
- A time-sensitive opportunity has a measurable expected return.
- The business has strong revenue but cannot meet conventional bank timing or credit requirements.
- The proposed remittance can be absorbed without jeopardizing payroll, taxes, inventory or essential operations.
FAQ
Is an MCA a loan?
Generally, no. An MCA is typically structured as a purchase of future business receivables. The agreement and applicable law control the transaction.
How fast can funding happen?
Some complete qualified files can move quickly, but timing depends on underwriting, verification, contracts and the provider.
Can bad credit qualify?
Some alternative providers consider challenged credit when business revenue, deposits and operating history are strong. Approval is never guaranteed.
What documents are common?
A completed application and recent business bank statements are common. Additional verification may be requested.