What a Merchant Cash Advance (MCA) Is
A merchant cash advance is typically an advance against future revenue. Instead of a traditional interest rate, you’ll often see a factor rate and repayment tied to daily/weekly collections.
How MCA Repayment Works
- Repayments are commonly daily or weekly.
- Costs may be expressed as a factor rate (example: 1.25x payback).
- Some offers pull from card sales; others debit bank accounts directly.
When an MCA Might Make Sense
- You need funding quickly and don’t qualify for lower-cost options.
- You have strong revenue consistency and understand the payback.
- The funding is tied to a clear ROI (like inventory that sells fast).
When to Be Careful
- If daily payments would stress payroll or rent.
- If you’re using an MCA to cover losses (not growth).
- If you’re considering stacking multiple advances (high risk).
Alternatives to Consider First
Before you commit, compare:
- Business lines of credit (flexible, often cheaper).
- Term loans (more predictable payments).
- Working capital loans (depending on structure).
- SBA loans (best for cost/term when you qualify and can wait).
FAQ
Is an MCA a “loan”?
Sometimes it’s structured differently than a traditional loan. Either way, treat it like real debt: know your total payback, payment schedule, and what happens if revenue dips.
Note: Educational content only—not financial advice.
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