What is a Merchant Cash Advance Loan?

A merchant cash advance (MCA) isn’t technically a loan, but rather a cash advance based upon the credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly.

Merchant cash advance providers evaluate risk and weight credit criteria differently than a banker. An MCA provider looks at the daily credit card receipts to determine if the business can pay back the funds in a timely manner. Basically, a small business “sells” a portion of future credit card sales to acquire capital immediately.

When does it make sense for a business to use a merchant cash advance? An MCA is an option when a business needs access to capital quickly to take advantage of an opportunity to purchase inventory at a discount, a special marketing opportunity, or other short-term capital need. And, because credit requirements are less stringent, it could be an option for a business that does a lot of credit card transactions, but might have less-than-perfect credit.

How to Apply

The time it takes to get approved for a merchant cash advance could be anywhere from hours to a few days, depending on the paperwork and other details. And once the process is approved, a business could see the funds in their account within 2 days.

The application process isn’t as complicated as a traditional loan, which typically makes the merchant cash advance approval process a faster option. Here are the steps a business needs to take:

Apply for funding

Provide documentation

Set up the credit card processing

Finalize the details

Receive the funds

Bank Funding Obstacles

All lending institutions focus mainly on a business’ quality of earnings. The main reason small businesses are denied funding from traditional avenues, like your bank, are due to insufficient collateral, debt load, and lack of personal credit.