Key takeaways

  • A merchant cash advance is an advance of cash that will be repaid from a percentage of your sales
  • The best merchant cash advances are transparent about their fees and repayment schedules
  • Due to potentially high fees, you should consider other sources of funding before getting an MCA

If you’re running short on cash and funding opportunities, a merchant cash advance (MCA) might be the best option to keep your business running. MCAs aren’t technically business loans, as advances and repayments are taken from a percentage of your future sales.

MCAs also tend to have high approval rates. According to the Federal Reserve Banks’ 2022 Small Business Credit Survey, MCAs have the highest approval rates for business loans, with 90 percent of applications at least partially approved.

That said, MCAs don’t report to credit bureaus or stick to the usual lending laws that cap interest rates. Lenders often charge high fees that translate into some of the steepest interest rates of any business loan.

Ideally, merchant cash advances should be sparingly and for emergencies. Also, be sure to choose from these reputable providers offering lenient requirements and high loan amounts.

Compare the best lenders for merchant cash advances

Lender Best for Loan amounts Bankrate score
Lendio Loan marketplace for MCAs $5,000 to $2 million 4.6
PayPal Accessible merchant cash advances $1,000 to $150,000 for first-time borrowers<br />$250,000 for repeat borrowers 4.2
Uncapped Easy application $10,000 to $10 million 4.1
SBG Funding High loan amounts $10,000 to $5 million 4.6
Credibly Nationwide availability $5,000 to $400,000 4.6

Lendio logo
Best loan marketplace for merchant cash advances


Rating: 4.6 stars out of 5
Learn more in our Bankrate review

PayPal logo
Best for low revenue

PayPal Working Capital loan

Rating: 4.2 stars out of 5
Learn more in our Bankrate review

uncapped logo
Best for easy application


Rating: 4.1 stars out of 5
Learn more in our Bankrate review

SBG Funding logo
Best for high loan amounts

SBG Funding

Rating: 4.6 stars out of 5
Learn more in our Bankrate review

Credibly logo
Best for nationwide availability


Rating: 4.6 stars out of 5
Learn more in our Bankrate review

What is a merchant cash advance?

A merchant cash advance (MCA) is a type of financing that bases funding amounts on past sales and repays the loan from future sales. Typically, with MCAs, you pledge a portion of your future sales to the repayments.

The MCA may or may not have repayment terms. Not having repayment terms gives you the benefit of paying back the advance as fast or as slowly as the sales come in. But MCAs aren’t bound by loan usury laws, meaning they can charge whatever borrowing fees they want. Many MCAs have the equivalent interest rates of 50 percent or more.

What features to look for in a merchant cash advance

The best merchant cash advances will give you all the details about your repayments upfront. Since repayments come from your future sales, you’ll want to understand the terms and percentage of sales that you’ll be repaying. Many MCAs also have an aggressive payment schedule. Look at what’s required for these loan features ahead of time:

Eligibility criteria

You first want to look at the advance’s minimum credit and revenue requirements to see if you’re eligible for the financing. The exact criteria can vary significantly, with some advances accepting a 500 personal credit score and $100,000 in annual revenue, while others require revenue as high as $350,000.

Factor rates

Most merchant cash advances charge a factor rate instead of an interest rate, such as 1.10 to 1.50. This rate gets multiplied by the entire loan amount at the beginning of the loan. So, an advance with a 1.40 factor rate that’s repaid within 12 months has an annual interest rate of 40 percent.

To keep your borrowing costs low, you’ll want to find a merchant cash advance with the lowest factor rate charged that’s possible. Since factor rates can quickly add up to high interest, it’s worth your time to compare multiple MCAs.

Repayment schedule: daily, weekly or monthly

Merchant cash advance repayment schedules are usually daily or weekly, which can feel like an aggressive repayment plan. Some MCAs offer a more flexible monthly payment, giving you more wiggle room in your budget to repay the advance.

Percentage of repayment

You want to look at the available percentages of repayment, such as 10 percent to 20 percent, and determine if you can handle that percentage. This percentage will be applied toward paying off your merchant cash advance plus any fees, like the factor rate.

Term lengths

Some MCAs don’t state repayment terms and allow you to repay the advance for as long as it takes to complete repayment from your sales. But, other MCAs set repayment terms of 15 to 36 months, so it depends on the financing company. The longer the terms, the lower each payment will be.

Alternatives to getting a merchant cash advance

While merchant cash advances have a high rate of approvals and lenient requirements, you should use MCAs only when absolutely necessary. Always consider whether you qualify for another type of business loan, as many online lenders offer lenient requirements, like business loans with a 500 credit score requirement or $100,000 or less in annual revenue.

Other types of funding you may want to look into:

  • Business line of credit. Similar to a business credit card, a business line of credit gives you a predetermined limit that you can typically reuse as you make repayments.
  • Business credit card. A business credit card is a revolving line of credit and often comes with rewards, like cash back or introductory offers. Credit cards don’t typically have requirements for your time in business or revenue, though you will have to meet its credit requirements. You can either qualify with good to excellent credit or go for a secured credit card, which may be more accepting of poor to fair credit.
  • Invoice financing. Rather than relying on your credit to approve the loan, invoice financing companies look at your outstanding invoices and base the advanced amount on the likelihood that your clients will pay the invoice.
  • Business grants. Essentially free money, you don’t have to repay a business grant once you’ve been awarded the amount. But you do need to qualify for the grant, and you’ll be competing with other businesses, making this type of funding competitive.
  • Crowdfunding. You can raise the funds you need through traditional crowdfunding. Or you can leverage peer-to-peer lending, which raises funds for a loan through a pool of individual investors. You would then repay the loan on the agreed terms.

Bottom line

Merchant cash advances can be a last-resort option for financing if you can’t get funding elsewhere. This alternative form of business financing tends to offer lenient requirements for credit, time in business or revenue with higher approval rates than traditional loans. But before committing to a merchant cash advance, be sure to explore other business loan options. Doing so may save you money in interest or fees if you qualify for another type of financing.

Frequently asked questions

  • Merchant cash advances are worth it if you need emergency funds and don’t qualify for other types of financing. But, due to their high fees and lack of lending regulations, you could end up paying very high interest rates.
  • A merchant cash advance isn’t technically a business loan, so MCAs are not reported to the credit bureaus. Regardless, you do want to prioritize making payments to keep your account in good standing with the financing company.
  • Many merchant cash advances will charge you a factor rate instead of an interest rate. This factor rate gets applied to the entire loan amount upfront, meaning you pay the fee whether or not you repay the loan early. The factor rate may be as low as 1.04 or as high as 1.50.