By CASEY FROST
Casey Frost is a small business finance writer and content strategist with 8+ years covering business lending, SBA programs, and fintech. Casey previously worked as a lending analyst at a regional bank and writes practical guides that help entrepreneurs compare funding options and avoid costly mistakes.
Updated: August 2025
Reading Time: ~8 minutes
Need Fast Business Funding? Read This Before You Sign
If your small business needs cash in 24–72 hours, a Merchant Cash Advance (MCA) can deliver—even if you have bad credit or no collateral.
But there’s a catch:
MCAs can cost the equivalent of 80%–350%+ APR, draining your cash flow fast.
In this guide, you’ll learn:
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✅ How MCAs work (and why they’re not really “loans”)
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✅ True costs & hidden fees
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✅ When an MCA makes sense—and when to avoid it
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✅ Lower-cost alternatives
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✅ Best MCA providers in 2025
What Is a Merchant Cash Advance?
A merchant cash advance isn’t a traditional loan. Instead, it’s a purchase of your future sales receivables—a structure explained in detail by the U.S. Small Business Administration.
How it works:
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The MCA provider gives you a lump sum upfront.
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In return, they take a fixed percentage of your daily or weekly sales until you’ve repaid the advance × factor rate.
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Payments are automatically deducted from your credit card sales or bank account.
Example:
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You receive $10,000 at a factor rate of 1.4 → You repay $14,000.
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If repayment is over 6 months, the APR equivalent could exceed 100%.
MCA vs Other Business Funding Options
| Funding Type | Typical APR/Cost | Speed | Best For |
|---|---|---|---|
| Merchant Cash Advance | 80%–350%+ | 1–3 days | Urgent funding, poor credit |
| Business Line of Credit | 7%–25% | 2–7 days | Ongoing working capital |
| Short-Term Business Loan | 10%–30% | 1–5 days | Fixed, predictable payments |
| Invoice Factoring | 20%–79% | 1–3 days | B2B unpaid invoices |
Understanding MCA Costs: Factor Rate vs APR
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Factor Rate: A flat multiplier (usually 1.1–1.5) applied to your advance.
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APR Equivalent: The real annualized cost—often much higher than the factor rate suggests.
You can use this merchant cash advance APR calculator from Nav to estimate your true cost.
Example:
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Advance: $50,000
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Factor Rate: 1.3 → Total repayable: $65,000
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Term: 6 months → APR equivalent: ~120% (or more with fees)
Important: With MCAs, paying off early does not reduce your total owed—you still owe the full contracted amount.
Pros & Cons of Merchant Cash Advances
| Pros | Cons |
|---|---|
| Fast funding (24–72 hours) | Extremely high cost (80%–350% APR) |
| Lenient credit requirements | Daily/weekly repayments can hurt cash flow |
| No collateral needed | No savings for early payoff |
Who Qualifies for an MCA?
Most MCA providers require:
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Monthly card sales: $5,000–$50,000+
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Time in business: 6+ months
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Documentation: Bank or POS statements
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Credit score: Flexible (often 500+ accepted)
Application Process: Step-by-Step
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Compare providers—check factor rate, holdback %, and fees.
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Submit documents—usually 3–6 months of bank/POS statements.
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Get an offer—review total repayment & term.
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Sign agreement—Ensure all fees are disclosed.
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Receive funds—typically within 24–72 hours.
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Repay automatically from daily/weekly sales.
For more details on required documentation, see the IRS guide on business records.
Risks You Should Know
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Predatory contracts—Some lenders hide excessive fees in repayment terms.
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Cash flow drain – Daily deductions can hit hard during slow sales weeks.
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Legal disputes—In 2024, New York’s Attorney General sued Yellowstone Capital for MCA terms with APRs exceeding 820%, calling them “predatory and deceptive.
Alternatives to Merchant Cash Advances
The Federal Reserve’s Small Business Credit Survey shows that many small businesses use lines of credit and short-term loans as cheaper options compared to MCAs.
| Alternative | Pros | Cons |
|---|---|---|
| Business Line of Credit | Lower APRs, flexible | Requires better credit |
| Short-Term Loan | Predictable fixed payments | Slightly slower funding |
| Invoice Factoring | Fast for B2B businesses | Costs vary |
| Equipment Financing | Collateralized, competitive rates | Only for equipment purchases |
Top Merchant Cash Advance Providers
| Provider | Funding Speed | Factor Rate Range | Max Advance |
|---|---|---|---|
| OnDeck | 1–2 days | 1.1–1.4 | $250,000 |
| RapidAdvance | 1–3 days | 1.1–1.5 | $500,000 |
| Fora Financial | 1–2 days | 1.15–1.4 | $750,000 |
| BlueVine MCA | 1–3 days | 1.1–1.35 | $250,000 |
Frequently Asked Questions
1. What credit score is needed for an MCA?
Often, 500+ is accepted—the focus is on sales volume, not credit history.
2. Can I repay early to save money?
No. MCAs have fixed factor rates—you owe the full amount regardless of early payoff.
3. How fast can I get MCA funds?
Most providers fund within 24–72 hours.
4. Will an MCA affect my credit score?
Usually not—unless you default and the provider reports it.
Should You Use an MCA?
MCAs can provide life-saving cash in urgent situations—but they are one of the most expensive forms of financing.
Best used when:
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You need money immediately
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You can repay quickly without hurting cash flow
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You’ve exhausted cheaper funding options
If you want to compare lenders side-by-side, tools like Fundera’s business loan marketplace let you filter by rate, term, and funding speed.
📌 Next Steps:
- Compare MCA Offers Now → (Takes less than 60 seconds—no impact on credit score)
- Equipment Invoice Factoring →
- See Small Business Loans →
- Check: Business Line of Credit →
- And Small Business Loan Requirements →
Disclaimer: Rate ranges are illustrative and current as of the “Updated” date above. Actual APRs and fees vary by lender, credit profile, collateral, and market conditions. Always request a full loan disclosure (APR + all fees) before signing.
