What is a Merchant Cash Advance

A Merchant Cash Advance (MCA) provides small business owners with quick business financing. Unlike some traditional loans, a business cash advance doesn’t require any upfront collateral.

It is especially useful for business owners that have bad or no personal credit. You get this financing based on your company’s future revenue, so it’s not a loan. You are basically agreeing to give a cut of your future revenue for this upfront financing. Merchant cash advances are offered through private lenders.

How does a MCA work?

It is essential for your business to accept payment via credit/debit to get a MCA. This allows the private lender to work with your payments processor to set up the entire system seamlessly. This also provides your customers with a convenient way to make payments.

You allow the private lender to view your monthly revenue from your debit/credit sales using your business bank statements. The lender will then process your business through their algorithms to see how much they can lend you. The lender will then let you know the cost of borrowing from them.

Unlike traditional loans, an MCA doesn’t have a set repayment end date. You also do not give back a set amount every day, it is a percentage of your sales. Let’s say the cost of borrowing is 20%. Meaning, if you make $100 one day and $2000 the next, then you will only pay $20 and $200 respectively.

To pay back a MCA you have two options:

Split settlement repayment

The payment processor splits your sales and lender payment and “splits” the agreed upon percentage between you and the lender. The processor basically acts as a middleman here, ensuring correct splitting amongst the parties involved.

Daily Debiting repayment

You authorize the lender to withdraw a percentage of your deposited sales directly from your business bank account.

Is a MCA right for you?

Since the MCA is given to those that have consistent daily sales processed on their debit/credit card processing system, you just need to have daily sales. Yep, it’s that simple. Let’s consider scenarios where you may want to use an MCA to ensure your business runs smoothly.

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Scenario #1

You are a small business owner in Canada and a very good salesperson. You have a product that sells, and you know how to sell it. You still haven’t quite figured out how to optimize the cost of producing that product though. So, you need some financing to do some R&D or hire more staff to sell your product in larger quantities. Once this gets going, you have time to optimize the product to reduce production cost. Since MCAs are based off on your daily revenues, you have a good chance of getting approved for one.

Scenario #2

You’ve taken a personal loan from a bank to start your small business. You didn’t think that the operating costs would be as high as they are. The equipment you bought broke down and needs to be fixed. The downtime of the equipment and the additional costs have already put you above budget. You’ve hit a small dip in your revenues that may force you to miss payments. Because your personal credit was already used to finance for your business, you need to look at business financing. MCA will be a quick way for you receive funding to close the cash flow gap. You may lose a bit of your profit, but you do not miss payments and keep your credit score in check.


Merchant cash advances are a type of business financing that is offered based on your future sales. They are best utilized in businesses that have consistent daily sales via debit or credit. They are ideal for businesses that are already established and are looking to expand or cut costs in their business. It is essentially a method to receive a part of your future profit upfront rather than waiting months to accumulate enough capital.