What Is a Merchant Cash Advance?

If you’ve been looking for a way to get fast money to fund your business, you may have considered a merchant cash advance as an easy choice. Also called a “business cash advance,” this product is similar to a paycheck advance for consumers.

How does it work? What does it cost? Here are the basics of this popular type of small business financing.

Merchant Cash Advance Explained

A merchant cash advance (or “MCA”) offers an advance against future sales. This type of financing is generally available to businesses that have a steady volume of credit card sales, including retail stores, restaurants, and medical offices.

Documentation needed during the application may include:

  • proof of your identity (such as a state-issued ID)
  • bank and credit card processing statements
  • business tax returns
  • bank statements

Knowing your credit scores is smart, as well; the lender may run a soft credit check on the owner’s personal credit.

The amount you can get via an MCA ranges from a couple of thousand dollars to over $200,000. Keep in mind, however, that the payback time is usually very short – 18 months or less, in most cases. To pay the money back, the lender will typically take a percentage of sales, usually on a daily basis. Repayments will come out of your connected merchant account and are calculated based on sales processed through credit or debit card cash register sales. Cash or check sales don’t count toward the daily quota.