Definition
A merchant cash advance gives a business a lump sum now in return for a cut of its upcoming card or online takings, collected until a fixed amount has been paid back. Collections move up and down with trade, so it is mostly used by cafés, shops and others that take lots of card payments. The total cost is usually fixed upfront, so it can be expensive per month if repaid quickly, and early repayment may save little.
A merchant cash advance is shaped around a card terminal rather than a repayment schedule.
How it works
The provider reviews your card settlement history, offers an advance and states a total to repay plus the share of daily card sales it will collect. Collections continue until the total is reached. Busy days repay more, quiet days less.
The cost
Because the total is fixed at the start, repaying quickly raises the effective cost per month, and paying off early may not reduce what you owe. Convert offers to dollars using the true cost calculator.
Is it right for you?
It can suit businesses with strong, seasonal card takings and no property to offer. For a specific asset, equipment finance is usually worth pricing first. Our merchant cash advance review covers the pros and cons. To compare options, make one enquiry.
Common questions
How are merchant cash advance repayments collected?
Either a slice is taken from each day's card settlement or a set amount is debited. A percentage-of-sales structure flexes with trade; a fixed debit does not.
Is a merchant cash advance a loan?
Legally it is frequently set up as buying a share of future sales, but in practice the business treats it as borrowed money. Read the contract carefully.
Sources and further reading