A merchant cash advance, also known as an MCA, revenue advance or business cash advance, is a way to borrow a lump sum based on your future sales or revenue. Requirements are generally more lenient than other types of business financing, and funding is typically fast, making it an option for newer businesses or those with less-than-perfect credit. But this type of funding can be expensive, so it’s important to compare multiple lenders to find the best deal.
Finder’s business loan experts analyzed dozens of lenders offering merchant cash advances. We ultimately chose lenders with competitive rates, fast funding and flexible repayment terms.
Some of the criteria we used to evaluate lenders include:
Interest/factor rates
Additional fees
Advance amounts
Loan terms
Repayment plans
Turnaround times
Time-in-business requirements
Revenue requirements
Credit score requirements
Reputation of the lender
How to compare merchant cash advances
It’s a good idea to compare multiple lenders that offer MCAs and consider the following factors before deciding.
Rates. Merchant cash advances typically charge a factor rate rather than interest, and rates can be rather high for this type of financing.
Fees. Some lenders also charge additional fees such as setup, administration or service fees, among others. To save money, look for a provider that charges minimal fees.
Turnaround times. Funding is typically fast for MCAs, with some offering advances as quick as the same day you apply, although others may take a few days.
Loan terms. Most business cash advances have loan terms of 12 months or less, but a few stretch as far as three years if you need a longer term.
Repayment terms. Advances often require weekly or daily repayment schedules, but some lenders offer bi-weekly or monthly repayment terms, which may make budgeting easier.
Lender requirements. As you compare lenders, keep a close eye on credit score, revenue and time-in-business requirements to make sure you meet the criteria. Otherwise, you may look for business loans that fit your specific needs, such as business loans for startups or without a credit check.
What is a business cash advance and how does it work?
A merchant cash advance, which may also be referred to as a business cash advance or revenue advance, is a cash advance based on future sales or revenue. The advance comes as a lump sum payment, and you agree to pay it back through a percentage of your incoming sales.
Most commonly, repayments are deducted automatically from your account weekly or daily, although some agreements may allow for bi-weekly or monthly repayments. Terms are generally short for business cash advances, usually three to 12 months, but some lenders may offer longer terms.
Revenue advances typically aren’t renewable, unlike business lines of credit, but some lenders advance additional funds after paying off a percentage of your original loan. And while there isn’t usually an incentive to repay MCAs early, there are a few lenders, like Fora Financial, for example, that give discounts for early repayment.
Pros and cons of merchant cash advances
Consider the advantages and disadvantages of MCAs.
We currently don't have that product, but here are others to consider:
Looking for other options? Check out these similar products.
How we picked these
What is the Finder Score?
The Finder Score crunches 12+ types of business loans across 35+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.
To provide a Score, we compare like-for-like loans. So if you're comparing the best business loans for startups loans, you can see how each business loan stacks up against other business loans with the same borrower type, rate type and repayment type.
The exact requirements to qualify can vary significantly by lender, but you’ll typically need to meet the following minimum criteria:
Six months or more in business
$10,000+ in monthly revenue
Business checking account
Some lenders may also check your credit, although it’s often only a soft pull. But in general, your credit score isn’t as heavily weighted for merchant cash advances as it is with other types of business financing.
How to apply for a merchant cash advance
In general, the application process for a business cash advance goes as follows:
Fill out a simple online application.
Submit the required documentation.
Review your offer and sign your agreement.
Get funded and follow the repayment plan.
Some lenders may require an extra step where you talk to a lending specialist prior to funding, but that’s not always the case.
Alternatives to merchant cash advances
Because MCAs are generally one of the more expensive forms of business financing, you may want to consider a few other options.
Online business loans. If you’re struggling to qualify for traditional bank loans, you may have better luck looking into online business loans instead. They typically have more lenient requirements than banks and offer more affordable financing than revenue advances.
Invoice factoring or financing. If you sell to other businesses or government agencies, invoice factoring or invoice financing could be a good option. Like merchant cash advances, requirements are usually more lenient than other types of business loans, but selling your invoices can also be quite expensive.
Business line of credit. A business line of credit is another good option to cover cash flow needs — and it’s renewable and more affordable — but requirements to qualify may be more strict.
Equipment financing. If your goal for the cash advance is to buy equipment or machinery, an equipment loan may be a better move. The equipment acts as collateral for the loan, so you might qualify even if your credit isn’t ideal.
Frequently asked questions
Business cash advances are generally quite expensive, but they may be an option if you can't qualify for other types of business funding. However, the repayment plans can be rigorous, so be sure the payments fit your budget.
If the lender requires a hard credit pull as part of the application process, your score might drop a few points. However, lenders that offer revenue advances generally only conduct a soft credit check and don't report to the credit bureaus. So, even if you can't make your payments, there shouldn't be any impact on your credit score.
How much you can borrow mostly depends on how much you make in monthly sales. If you have consistently high monthly sales, you'll be able to borrow more than someone with low or inconsistent revenue.
Lacey Stark is a freelance personal finance writer for Finder, specializing
in banking, loans, investing, estate planning, and more. She has 20
years of experience writing and editing for magazines, newspapers, and
online publications. A word nerd from childhood, Lacey officially got her
start reporting on live sporting events and moved on to cover topics
such as construction, technology, and travel before finding her niche in
personal finance. Originally from New England, she received her
bachelor’s degree from the University of Denver and completed a
postgraduate journalism program at Metropolitan State University also
in Denver. She currently lives in Chicagoland with her dog Chunk and
likes to read and play golf.
See full bio
Compare the best business cash flow loans in 2023.
Advertiser disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
