What is a merchant cash advance and how does it work?

A merchant cash advance (MCA) provides businesses with a lump sum of capital in exchange for a percentage of future sales, typically from credit card or daily revenue transactions. While an MCA is not technically a loan, it functions similarly by offering immediate access to funds.

How MCAs work:

• Merchant cash advance (MCA) providers evaluate sales history for approvals instead of your credit score.
• Repayment is tied to daily or weekly revenue, meaning you don't make monthly payments like with other loans.
• MCAs can be ideal for businesses with fluctuating or seasonal income, especially during periods of limited cash flow.
• Funding can be available in 24 to 48 hours.

Why are merchant cash advances popular in 2026?

Merchant cash advances are gaining popularity among small business owners in the U.S. due to their speed, flexibility, and low barrier to entry—especially for those with limited credit.

• MCAs bypass traditional credit requirements since they base funding on future sales.
• This funding type can be suitable for emergency expenses or time-sensitive investments.
• Growth in alternative lending platforms has made MCAs more accessible to the average business owner.

How do MCA loans differ from traditional financing?

Unlike traditional business loans, MCA loans do not come with a fixed repayment schedule or standard interest rate. Instead, they rely on a revenue-based repayment model.

• Fixed vs variable repayment: Costs for MCAs adjust based on sales.
• Short-term vs. long-term financing: MCAs usually last 3 to 18 months, and they can be tailored to your needs.
• Interest vs. factor rates: MCAs use factor rates, which can translate to a higher APR than you might expect.

What are the benefits of merchant cash advances?

MCAs provide immediate access to capital with flexible repayment terms, making them a preferred choice for businesses needing fast funding.

• Approval based on sales instead of credit means MCAs can be an option for business owners with imperfect credit scores.
• Merchant cash advance providers don't require any collateral since repayment is based on future sales.
• Payments scale with your revenue, meaning you'll only pay more as your business brings in more cash.
• Fast funding within 1 to 2 business days is available with some providers.

What are the risks of MCA loans?

While convenient, MCA loans come with high costs and may cause financial strain if your revenue drops or repayments become unsustainable. Here are some reasons this may be the case.

• Factor rates result in APRs that often exceed 100%.
• Daily deductions from business revenue can strain cash flow over time.
• Short repayment periods increase financial pressure.
• A risk of increased debt comes into play if MCAs are used repeatedly.

Who qualifies for a merchant cash advance?

Eligibility for an MCA is generally based on consistent business revenue and operational history rather than personal or business credit.

Common requirements include:

• Monthly revenue of at least $5,000 to $10,000
• At least 6 to 12 months in business
• Strong credit card or bank deposit volume
• Minimal documentation required

When should you use a merchant cash advance?

MCAs are best for businesses that need fast access to cash and can handle fluctuating repayment that is based on future sales. Consider using a merchant cash advance if your business falls into one of these categories:

• Seasonal businesses with unpredictable cash flow
• Credit-challenged businesses needing working capital
• You face emergency purchases or unexpected expenses
• Your business needs fast funding within a few business days

What are the key differences between MCAs and traditional loans?

MCAs and traditional loans differ in approval speed, cost, repayment structure, and risk. Each serves different business needs.

• MCAs tend to be high-speed, revenue-based, and expensive.
• Traditional loans are slower and credit-based, and they often come with lower overall costs.
• MCAs suit urgent funding needs, but fast funding comes at a premium.
• Traditional loans are ideal for businesses with excellent credit, time to wait for funding, and long-term growth plans.

What are the best alternatives to MCA loans?

If an MCA seems too risky or expensive, consider other financing options that may better suit your long-term goals. Other options include:

• Short-term business loans with lower APRs
• Business lines of credit for ongoing access to funds
• SBA loans for affordable, government-backed financing
• Equipment financing for specific purchases