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What Is

A Merchant Cash Advance?

Merchant cash advance financing allow your small business to leverage your future revenue in order to secure funding immediately. They are most often used when a company is confronting a critical cash shortage or other difficulties – especially if they don’t have access to more traditional business loans. Approval traditionally requires that your business has a relatively reliable stream of daily income via credit card purchases, like that of restaurants, doctor’s offices, retail shops, etc. Because of this, a merchant cash advance is sometimes referred to as a “working capital advance.” In recent years, however, merchant cash advance lenders have begun providing services to select other types of businesses as well.

It is relatively easy for businesses with reliable income to get approved for this sort of small business cash advance, since it relies less on your credit score and more on your business’s income stream. These advances are not technically “loans” in the legal sense. Merchant cash advance companies are essentially purchasing the right to a portion of your future income rather than loaning you money to be repaid with interest, so merchant cash advance financing isn’t regulated by the usual federal agencies who manage other types of merchant loans. Merchant cash advance companies are regulated by the Uniform Commercial Code which governs business transactions across state lines, although the details of that oversight may vary from state to state. While we commonly refer to MCA companies as “lenders,” they are more accurately considered “providers” since there’s no “loan” involved. This is a technicality worth keeping in mind, even though it’s not usually necessary to overly worry about the terminology in casual use.

Unlike typical business cash advance loans, repayment of a merchant cash advance isn’t computed using interest rates or monthly installments. Instead, merchant cash advance lenders use what’s called a “factor rate.” Typical factor rates range from 1.09 to 1.5, although rates outside of this range are possible. The total amount advanced is multiplied by the negotiated “factor rate” and that’s how much must be repaid.

Repayment is typically structured one of two ways. Historically, the most common method is for the provider to claim a percentage of daily credit card sales until the amount is paid in full. This is called the “holdback amount” or simply the “holdout.” This offers the advantage of the business paying less during slow periods and more when business is good. It has become more common for MCAs to be set up for repayment via Automated Clearing House (ACH), which allows providers to withdraw fixed daily or weekly amounts directly from your business account. Please note that under either repayment system, the provider is not relying on the business owner to write a check or approve a transaction. The funds are removed automatically based on the merchant cash advance agreement until the amount borrowed plus “factor rate” charges is repaid in full.

This unusual means of calculating loan costs can obscure the true cost of the loan. It also leads to a somewhat ironic dynamic in which the faster your business repays the advance, the more you’re paying in terms of annual percentage rate (APR). Interest is computed on the balance of the loan over time, so paying extra towards principle can lower how much interest is paid over the life of the loan. With a “factor rate,” however, the total amount owed is the same whether it takes a month or two years to repay (although there are usually limits on how long repayment can take written into the contract). If business is good and repayment happens quickly, and the extra charges are computed as if they were figured using APR, faster repayment costs more. This is useful to consider if comparing merchant cash advances to other business cash advance options.

How Can I Apply?

First you’ll need to narrow your search for business loan companies to those who offer MCAs. It’s worth checking with your local bank or credit union, although many of the most flexible and reliable MCA providers are online. Be prepared to provide documentation proving your identity (any state-issued ID should do), your small business tax returns for the past two years, recent bank statements, and credit card processing records. Some providers may ask for your personal income statements as well, although you should be careful about agreeing to personally guarantee a merchant cash advance just in case something unexpected makes it difficult to repay the advance.

Even if you’re applying online, having your documentation handy makes it easier to provide specifics and answer any questions which may arise. It’s also possible a provider might ask what you intend to do with the money. This isn’t technically central to approval, but if the honest answer involves something that will strengthen or grow the business, it wouldn’t hurt to have a concise, persuasive response prepared.

As you may have guessed, Loanry can help you get started. We don't specialize in MCA credit facilities, but we work with many types of lenders who may be able to help. Just let us know when you're ready.

Concerns and Considerations

Merchant cash advances should not be your first consideration when considering how to finance a business. While they are relatively easy to acquire, the cost to your business is steep and you’re draining your own future income in order to secure short-term financial flexibility. If your business ends up performing below expectations, you could end up in a dangerous cycle of needing a new advance as soon as the previous one is resolved. That’s never a good situation, whatever the terms or terminology.

It’s important to recognize how easily the use of a “factor rate” to compute the cost of the advance obscures the actual cost of the advance. If your business qualifies for more traditional financing, it’s almost always in your best interest to pursue other options, or at least make careful comparisons as you shop business loans. If the MCA is the only type of business cash advance bad credit allows you to utilize, so be it. Make it your goal to grow your business and improve your credit rating so it’s not a permanent solution. On that note, it’s worth considering that because your transactions aren’t technically a loan, your repayment isn’t reported as such to the credit bureaus and you’re not improving your credit history as a result.

Finally, not all merchant service providers – the folks who process your credit and debit card transactions and other forms of electronic payment – work with merchant cash advance companies, so taking advantage of a merchant cash advance may require switching merchant processors.

So why does anyone take advantage of an MCA? Because they are a quick, relatively easy way to provide liquid resources for your business in a pinch. Bad credit doesn’t disqualify you, and if they can’t help your credit rating, neither can they easily hurt it, since repayment is based on your business income. These aren’t “secured loans” (they’re not actually “loans” at all), so you’re not risking your home or auto or investments if things go badly. Ideally, the advance acts as a “shot in the arm” or a fiscal “energy drink” for your business. You gain a little momentum, weather the storm, pay back the advance, and emerge financially stronger as a result.

That’s why MCAs are still an option.

Loanry® is here to help you get your Business Loans


Why Loanry?

Our goal at Loanry is to provide you with the information, tools, and connections you need to take more effective control of your personal and small business finances. If you’re an entrepreneur, figuring out how to finance a business is something you deal with every day in one form or another. You probably don’t have time to go from institution to institution, trying to negotiate the right business cash advance. Chances are you’d rather spend your energies growing and improving your business than sorting through interest rates and different types of merchant loans.

That’s where Loanry might be able to help. We’re not a lender; we have nothing to sell you. What we are is a “content mall.” The Goalry family of financial sites offers information, online financial tools, and other services across the spectrum. At the heart of that mall is a “lender marketplace.” In other words, once you’ve gathered your information and decided you’re ready to pursue a loan or business cash advance, you don’t have to scour the internet trying to sort through lenders. We’ve done that for you. We maintain a curated database of reputable and reliable online lenders (or in this case, “providers”). Some are general financial institutions; others specialize in business loans for bad credit or emergency cash advances.

When you share your basic information and what you need with us, help you find a provider who may be able to meet your needs. It’s then up to them to compete for your business, and up to you whether you choose to accept or not. We can’t tell you what to do, but we try to share our insights and offer you options. We can’t make it easy to run your own business – no one can. But it doesn’t have to be as hard as it sometimes seems, and you don’t have to do it all alone.


Merchant cash advances are usually used to weather a storm or bridge a gap. They’re a useful financial tool, but not intended as long-term solutions. It’s important to negotiate the best terms you can with your provider, and to explore other options as well. Ideally, you want to get to a place that your business doesn’t need these sorts of merchant loans, but instead qualifies for and is able to take advantage of more traditional forms of business financing.

Before taking out an MCA, ask yourself whether or not your situation might lend itself to an equipment loan, a traditional small business loan, or even taking your company public in order to secure investors. Consider adding a partner or partners, although they would naturally expect some input into how the business is run, as well as sharing in future profits when it’s wildly successful. You may even explore the possibility of taking out a personal loan to get through this short-term challenge, although doing so leaves you personally responsible for repayment, whatever happens. Entrepreneurship is, by its very nature, about risk and reward. There’s no single right answer to finding the balance between taking financial chances and being practical about your financial future. That doesn’t mean you shouldn’t consider both at every step along the way, however. There’s a time to press through difficulty and defy the odds and all those other motivational phrases and feelings. That’s what makes entrepreneurs different from everyone else – they take those risks and live those dreams. There’s also a time, however, to recognize when things simply aren’t going the way you’d hoped and cut your losses without digging yourself into further debt. Seek the insight of trusted friend or loved ones. Talk to other entrepreneurs – especially those who’ve both succeeded and failed along the way. In the end, though, it’s up to you to make the best call you can and do what seems best. If that requires financial information or connection to the right lender, we’re here. If it means regrouping and trying again some other time, well... we’ll be here when you’re ready. Either way, it’s not really failure when one thing doesn’t work; it’s only failure when you give up on everything.


Running your own business requires endless time, energy, and focus. You become an expert in your field and gladly explain anything and everything about what you do and everything connected to it to anyone who’ll listen – and maybe even to those who don’t.

We get pretty excited ourselves. We love talking about personal and small business finances (and yes, we realize this makes us weird). Our content mall is divided into related sites, each devoted to different aspects of your fiscal world. You can learn about different sorts of savings accounts or investment options on or check your credit scores on after you read about what is and isn’t likely to appear on your credit report. Learn how to create an effective household budget or watch a brief video outlining the different types of small business loans or how to best prepare for tax season. Use our online tools to compare loan options or estimate interest. Whatever you need to know, there’s a good chance it’s covered in plain, simple English and freely accessible from wherever you like, whenever you like, in one of our thousands of informational blog entries or our hundreds of videos.

As our “content mall” expands, we hope you’ll visit,,,,,,, and – and of course you may utilize as often as you wish. The focus of each is different, but the goal of everything in the family is the same – to help you take better control of your financial world by offering a central location for information, comparisons, and connections.


Did You Hear?

“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something—your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life."

Steve Jobs (Co-Founder, Chairman, and CEO of Apple)

Educate Yourself

The Ins & Outs of a Merchant Cash Advance:

When Money Today Matters Most

In this brief, easy-to-understand video, we cover the basics of most MCAs and what they can and can’t do for your small business. We discuss how to qualify and the logistics of repayment – including things like your “factor rate,” a “holdback amount,” and the differences between a “loan” and an “advance.” Most importantly, we breakdown the pros and cons of this form of small business cash advance, and look at other types of business loans you might consider before deciding to take advantage of an MCA.

At Loanry, we’re all about information and opportunity. It’s why we post informational pieces and create specific, content-heavy videos for you to access free of charge, anytime. It’s our conviction that if you have enough information and the chance to make your own decisions based on that information, you’ll usually make the best decision for yourself and those in your care. We can’t make it easy, but it doesn’t always have to be so hard – and you don’t have to figure it out all on your own.

Explained in 3 easy steps

How all of
this works?

It all starts with a simple loan request that takes a few minutes to complete.

We provide that information, at your request, to participating members who might be able to able to assist you with your financial needs. Many lenders transfer funds to your checking account as soon as the next business day.


Step 1

Start Loan Shopping

Tell us things like who you are and how much money you need.It only takes minutes.

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Step 2

Find Lender

The Loanry® Store may help you find a lender interested in your loan request.

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Step 3

Check out

Funds are deposited directly to your bank account as soon as the next business day.

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Pros & Cons of a Merchant Cash Advance Loan

Your business is in a tough spot or going through a difficult season. Should you leverage future profits to secure financial resources right now?

Pros: Relatively Easy to Obtain and Repay

If you have reliable income in the form of daily transactions, particularly in the form of credit or debit card payments, you can most likely secure a merchant cash advance, even with bad credit. Repayment is taken out automatically from daily or weekly transactions or in provider-initiated debits to your account.

Pros: Low Personal Risk

MCAs don’t require collateral and don’t typically rely on your personal credit history. Even if things go badly for your business, you’re protected.

Pros: Flexible Use

There are no restrictions on how you use a business cash advance. It’s your company and your money; you decide what makes the most sense going forward.

Cons: Expensive for Businesses

The use of “factor rates” instead of interest rates can easily make MCAs a pricey way to secure business cash advance loans. If you qualify for other forms of financing, it’s worth considering those first.

Cons: Pulls from Future Cash Flow

If your business is already struggling, the automatic repayment of an MCA from daily or weekly transactions can be particularly painful as you seek to build momentum and grown your business.

Cons: Limits Choices of a Merchant Service Provider

Not every merchant processor plays well with MCAs. You may not be able to retain your current processor or leave a processor you don’t like as long as you’re relying on them to process your MCA repayments.

See FAQs

Find answers to some of the most commonly asked questions here

We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


We are a marketing lead generator and advertising service designed to provide you with quick and convenient access to third-party lenders.


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