A merchant cash advance is a loan that is repaid using a portion of the businesses future daily credit card transactions.  Instead of making one fixed payment every month like you would from a loan with a fixed amount every month, a merchant cash advance is repaid in daily or weekly payments, plus fees, until the advance is paid in full.


While these are typically for businesses that have a high amount of credit card sales (think restaurants, auto repair, retail, etc) other businesses can apply too.  Merchant cash advances are generally not for new businesses (most require a business to be operating for at least 6 months to 1 year) and making $50k or more annually.


Merchant cash advances are popular because they are quick to get.  Time to receive funding is typically under a week.  The loan company will just need to look at the daily credit card receipts to see how much they will lend.  Another reason they are popular is that business owners with bad credit can get them.   Last, these loans are oftentimes unsecured so no collateral is needed.


Also, when sales are down, your payment may be too. When the repayment schedule is based on a fixed percentage of your sales, repayments adjust based on how well your business is doing.  If you have ever noticed a sign at your favorite restaurant that the credit card machine isn’t working for an extended period of time, they are likely using a merchant cash advance and not in a position to pay it back.



In all, while there are a lot of positives on the surface, there are a few negatives worth noting.  For starters, merchant cash advances are likely going to be the most expensive borrowing option and have confusing terms attached to the repayment.  If not managed properly, serious cash-flow problems are likely to occur.  Also merchant cash advances are not regulated like most loans are. While there are good companies in this space, there are many that are not – and may ruin your business.