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What is a Merchant Cash Advance?

First off, a Merchant Cash Advance is not a loan. Yep, you heard that right. It’s actually a cash advance based upon the credit card sales of a business. Think of it as a payday loan for your business, but instead of a fixed repayment schedule, you pay back with a portion of your future credit card sales.

How Does it Work?

Imagine this: You own a small cupcake shop. Business is booming, but you need some cash to buy a fancy new oven. Enter the Merchant Cash Advance. A lender gives you the cash upfront, and in return, they get a slice of your future credit card sales until the advance is paid off, plus fees.

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The Nitty-Gritty: Fees and Rates

Now, this is where things get a bit more complex. Instead of interest rates, MCAs use something called a factor rate, usually ranging from 1.2 to 1.5. So, if you get an advance of $10,000 with a factor rate of 1.4, you’ll have to repay $14,000. And remember, the frequency of repayment is tied to your sales, which can be a bit unpredictable.

Why Choose an MCA?

You might be thinking, “Why go for an MCA?” Well, it’s fast, doesn’t require collateral, and the approval process can be easier than traditional loans, especially if your credit isn’t top-notch. But, there’s a catch – it can be more expensive in the long run.

The Catch: Higher Costs

Yeah, MCAs can be a quick fix, but they can cost you more due to those factor rates. It’s super important to crunch the numbers and make sure it’s the right move for your business.

Real-World Example

Let’s paint a picture: Say, Sarah owns a flower shop. She takes out a $20,000 advance with a factor rate of 1.3. Her business repays 10% of her daily credit card sales until she repays $26,000. When business is good, she pays more each day, but when it’s slow, she pays less. This flexibility is the beauty of an MCA.

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The Pros and Cons


  • Fast Cash: You get the money quickly, often within a day or two.
  • No Collateral: Unlike traditional loans, you don’t risk losing your assets.
  • Flexible Payments: Repayments adjust based on your sales, which is great for seasonal businesses.


  • Costly: Higher costs compared to traditional loans.
  • Less Regulated: MCAs aren’t as regulated, which means you need to be careful with the terms.
  • Can Hurt Cash Flow: If your sales dip, a chunk of your revenue is still going towards repayment.

Making the Right Choice

Deciding if an MCA is right for your business comes down to a few key questions:

  • Can your business afford the higher costs?
  • How stable are your credit card sales?
  • Do you need quick cash without the hassle of traditional loan requirements?

Wrapping Up

Merchant Cash Advances can be a lifeline for businesses needing quick cash without the hurdles of traditional loans. But remember, they come at a cost. Always weigh your options, consider the fees, and think about the impact on your cash flow. Need more info on MCAs or other financial options? Feel free to reach out, and let’s chat about what’s best for your business!

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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$500,000 MCA Restructured Over 3 Years
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$350,000 MCA Restructured Over 2 Years

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