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Merchant Cash Advance (MCA)

Merchant Cash Advance (MCA) is a type of financing that provides businesses with a lump sum of capital in exchange for a portion of their future credit card sales. A Merchant Cash Advance is particularly useful for companies with a consistent volume of credit card transactions, such as retail stores, restaurants, and service providers.

The MCA process typically involves four main steps: application, approval, funding, and repayment.

application form


  • Business Information: The business owner or representative submits an application, including details about the company, its financial history, and average monthly credit card sales.
  • Documentation: The MCA provider might request bank and credit card processing statements to assess the business’s financial health and repayment capacity.


  • Risk Assessment: The MCA provider evaluates the business’s creditworthiness based on its financial information and credit card sales history. Since MCA approval criteria are often less strict than traditional loans, companies with lower credit scores might still qualify.
  • Offer Terms: If approved, the MCA provider presents the business owner with an offer detailing the lump sum amount, factor rate (the multiplier applied to the advance amount to calculate the total repayment), holdback percentage (the portion of daily credit card sales withheld for repayment), and any associated fees.


  • Acceptance: The business owner accepts the MCA offer upon agreeing to the terms.
  • Lump Sum: The MCA provider disburses the amount to the business’s bank account. This capital can be used for various business needs, such as purchasing inventory, covering operating expenses, or expanding.


  • Holdback: Repayment of the MCA is typically tied to the business’s daily credit card sales. A fixed percentage (the holdback percentage mentioned earlier) of each day’s credit card transactions is withheld by the credit card processor and sent to the MCA provider.
  • Repayment Amount: The holdback percentage continues until the total repayment amount (the advance amount multiplied by the factor rate) is reached. Therefore, the repayment period is variable and directly linked to the business’s sales performance.
  • Repayment Process: Since the repayment is automatic and tied to credit card sales, it can lead to higher repayment during high sales periods and lower repayment during slower sales periods. This flexible structure can be advantageous for businesses with fluctuating revenue.

A retail store is offered a merchant cash advance of $20,000 based on their credit card sales volume. The MCA provider offers this advance with a factor rate of 1.25. The business must repay $20,000 x 1.25 = $25,000 at this factor rate.
The retail store agrees to have 10% of their daily credit card sales holdback for repayment. On a day with credit card sales of $1,000, 10% ($100) would be the holdback for repayment, and the business would receive a deposit of $900 for that day’s sales.
The repayment continues until the total repayment amount of $25,000 is reached. Since the repayment is tied to credit card sales, the duration varies based on the daily sales volume. If sales are consistently high, the repayment period could be shorter. However, if sales are slower, it might take longer to repay the total amount.