Merchant Cash Advance (MCA)
A merchant cash advance (MCA) is an unsecured lump sum of money repaid over time through a percentage of future cash flow. MCAs are essentially payday loans used by businesses that conduct most sales through credit cards and debit cards.
Borrowers can typically receive a merchant cash advance in a short amount of time, and they are quite easy to be approved for. However, the interest rates on MCAs are quite high, and repayment is typically made automatically with each credit or debit card transaction, so there is little flexibility in the repayment terms.
Merchant cash advances can be a great way to improve cash flow in the short term, but they can involve high costs and induce long-term cash flow detriments. Business owners should be diligent in ensuring an MCA is right for them, as it’s not uncommon to see businesses trying to figure out how to get out of an MCA.