MCA Advance

A Merchant Cash Advance (MCA) is a type of business financing where a lender gives you a lump sum of cash upfront in exchange for a percentage of your future sales.

How It Works?

  1. Advance Received: You get a lump sum, e.g., $50,000.

  2. Repayment: You repay the lender daily or weekly from your business sales.
    • Typically, a fixed percentage (e.g., 10%) is deducted from daily sales.

    • This continues until the total repayment amount (the advance + fees) is paid off.

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Cost Of MCA

Instead of an interest rate, MCAs use a "factor rate", typically between 1.1 to 1.5.

Example:

  • Advance = $50,000

  • Factor rate = 1.3

  • You owe = $50,000 × 1.3 = $65,000

Even if you pay it off early, you still owe the full $65,000.

Pros VS Cons

✅ Pros:

  • Fast approval (often within 24–48 hours)

  • No collateral usually required

  • Flexible repayment (based on sales volume)

❌ Cons:

  • Very expensive (APR can exceed 100%)

  • Daily/weekly payments can hurt cash flow

  • Not regulated like traditional loans