Also known as: MCA, merchant cash advance, revenue purchase
A merchant cash advance (MCA) is not a loan but the purchase of a business's future revenue at a discount. A funder advances a lump sum of cash and is repaid by collecting a fixed percentage of the business's daily or weekly sales — or a fixed periodic ACH amount — until a predetermined total is reached. That total is the advance multiplied by a factor rate (for example 1.2 to 1.5), so an MCA is priced as a flat factor rate rather than an annual interest rate.
Say a business takes a $50,000 advance at a 1.4 factor rate. It agrees to repay $70,000 total ($50,000 × 1.4), remitted as a set share of each day's card or bank revenue until the $70,000 is collected. Because repayment scales with sales, slow days cost less and busy days repay faster. Approval is fast — often same-day — and leans on recent bank-statement revenue rather than credit score, which is why MCAs reach businesses that banks decline. The cost, expressed as an APR equivalent, is high, which is the trade-off for speed and accessibility.
A term loan has a fixed interest rate, a set monthly payment, and an APR you can compare directly to other loans. An MCA has a factor rate and variable timing — you owe a fixed total, but how fast you pay it depends on your sales. A loan amortizes over months or years; an MCA is typically repaid in a few months. MCAs are easier and faster to get but considerably more expensive, so they fit short-term, time-sensitive needs rather than long-term financing.
MCAs are a large and fast-moving corner of small-business funding precisely because they fund businesses banks turn away, quickly. For commercial lending brokers and the platforms that serve them, understanding factor rates, holdback percentages, and underwriting from bank statements is core to placing and pricing these deals.
Legally, no — an MCA is the sale of a portion of your future revenue, not a loan. That is why it is priced with a factor rate instead of an interest rate and repaid as a share of daily or weekly sales rather than fixed monthly payments.
A factor rate is the multiplier that sets your total repayment. Multiply the advance by the factor rate (e.g. $50,000 × 1.4 = $70,000) to get what you repay in total. Unlike an APR, it does not change based on how quickly you pay it back.
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