Merchant cash advance
Also called: MCA
A merchant cash advance is a purchase of a business's future receivables, not a loan. A provider gives you a lump sum today in exchange for a set share of your upcoming sales.
A merchant cash advance is structured as a sale, not borrowing. The provider buys a fixed dollar amount of your future card sales or deposits at a discount and collects it through a holdback, a percentage of each day's or week's sales. The cost is expressed as a factor rate, not an interest rate or APR.
Because collection moves with your sales, an advance can fit card-heavy businesses with uneven timing. The trade-off is cost: a short collection period can mean a high effective cost of capital, so price it in total dollars before you accept. It is a purchase of future receivables, not a loan.
Common questions
Is a merchant cash advance a loan?
No. A merchant cash advance is a purchase of future receivables, not a loan. Its cost is a factor rate rather than an interest rate or APR.
How is a merchant cash advance collected?
Through a holdback, a fixed percentage of your daily or weekly sales remitted automatically until the purchased amount is delivered.
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