A merchant cash advance (MCA) is the purchase of a portion of a business's future sales. The funder pays the business a lump sum up front; the business delivers an agreed amount of its future receivables back through small daily or weekly payments until the total is delivered. It is not a loan: there's no interest rate and no fixed repayment date, and the cost is set up front by a factor rate. InstaFunders funds $10,000 to $2,500,000 for businesses with 12 months or more in business and $50,000+ in monthly deposits.
What is a merchant cash advance?
A merchant cash advance is a sale, not a loan. Your business sells a slice of its future receivables (the card sales, deposits and other revenue you'll bring in over the coming months) to a funder at a discount. You get the money now; the funder gets paid back as that revenue arrives.
Because you're selling future sales rather than borrowing, a merchant cash advance is underwritten mostly on the health of your business's cash flow, not on collateral or a perfect credit history. That's why businesses that can't get a bank line of credit, or can't wait weeks for one, often use an MCA instead.
Three numbers define every advance:
- The funded amount: what lands in your account.
- The purchased amount: the total of future receivables you're selling. We call it your hard stop number, because it's fixed before you sign and it never grows.
- The payment: a set daily or weekly amount, based on an agreed percentage of your sales, delivered until the purchased amount is reached.
How a merchant cash advance works, step by step
- You apply. A short application plus your last three months of business bank statements (and month-to-date). California businesses send four months.
- We underwrite your cash flow. An underwriter reviews your deposits, balances, existing advances and credit. We work to get to a responsible "yes."
- You get an offer. It shows the funded amount, the purchased amount (your hard stop number), the payment and how often it's collected. You know the total cost before you sign anything.
- You sign and get funded. Funds can be in your business bank account in as little as 24 hours after approval.
- Payments run automatically. A fixed daily or weekly ACH debit from your business account, until the purchased amount has been delivered.
For more on the mechanics of payments, see how merchant cash advance payments work.
What a merchant cash advance costs
An MCA is priced with a factor rate rather than an interest rate. Multiply the funded amount by the factor rate and you get the purchased amount, which is the total you'll deliver. The cost is fixed at signing; it doesn't compound and it doesn't grow if the advance takes longer to deliver.
Hypothetical example. A business receives $100,000 at a factor rate of 1.40. The purchased amount is $140,000, so the cost of the advance is $40,000. Delivered over about 140 business days, the daily payment would be roughly $1,000. These are round illustrative numbers, not an offer; your offer states your actual figures.
Factor rates vary with risk: time in business, the consistency of your deposits, how many advances you already have, your credit and your industry all play a part. Try different numbers in the merchant cash advance calculator, and see how to read an MCA offer so you can compare offers on equal terms.
Because an advance is short (InstaFunders' maximum term is 10 months), the cost expressed as an annual percentage rate can look high. That's the trade-off for speed, flexibility and funding that doesn't depend on collateral. Some states require funders to show an estimated APR; see state disclosures.
Merchant cash advance vs. a business loan
| Merchant cash advance | Traditional bank loan | |
|---|---|---|
| What it is | A purchase of future receivables | Borrowed money with interest |
| Underwritten on | Your cash flow and deposits | Credit history, collateral, financials |
| Cost | A fixed factor rate, known up front | Interest that accrues over the term |
| Term | Months (up to 10 months with us) | Often years |
| Paperwork | Application and bank statements | Tax returns, financial statements, business plan |
| Speed | In as little as 24 hours after approval | Often weeks or longer |
The full comparison, including when a loan is the better choice, is in merchant cash advance vs. business loan.
Who a merchant cash advance is right for
An MCA works best for an established business with steady revenue that needs capital quickly for something that pays for itself: inventory before a busy season, a contract that needs labor up front, equipment that's down, a second location. It suits businesses whose deposits are strong but whose credit or paperwork doesn't fit a bank's box.
It's a poor fit if your revenue is falling with no plan to turn it around, or if the money would only cover losses. Short-term capital is a tool for growth and timing, not a fix for a business that isn't working. If that's where you are, we'll tell you.
Requirements to qualify with InstaFunders
- 12 months or more in business
- $50,000+ in average monthly deposits, with at least 5 deposits a month
- A credit score of 500 or higher
- An average of 5 or fewer negative-balance days a month
- A business located outside Utah, New York and Connecticut
We don't fund trucking and logistics, auto sales, nonprofit organizations, debt consolidation and credit repair, debt collection, cannabis, publicly traded companies and law firms. Already have an advance? That's fine: second position and onward is our strong suit, and first-position deals are considered case by case. Everything is on the requirements page.
Pros and cons
Advantages
- Speed. Decisions are quick, and funds can arrive in as little as 24 hours after approval.
- Built on cash flow. Strong deposits matter more than a perfect credit file. Scores from 500 are considered.
- A fixed, known cost. Your hard stop number is set before you sign and never grows.
- Light paperwork. An application and bank statements, not tax returns and a business plan.
- Payments tied to your sales. If revenue dips, you can ask for a reconciliation to bring payments in line with what you're actually bringing in.
Trade-offs
- Higher cost than bank credit. You're paying for speed and flexibility.
- Frequent payments. Daily or weekly debits need to fit your cash flow. Weekly payments are available in many cases; see weekly payments.
- Short terms. Up to 10 months with InstaFunders, so the advance should fund something that pays back quickly.
Frequently asked questions
Is a merchant cash advance a loan?
No. A merchant cash advance is the purchase of a portion of your future receivables. There's no interest rate and no fixed repayment date; the cost is a fixed amount set by the factor rate, and payments are based on an agreed percentage of your sales.
How much can I get from InstaFunders?
From $10,000 up to $2,500,000. The amount depends on your monthly deposits, time in business, existing advances and credit. Deals from about $500,000 up to $2,500,000 are covered on our large funding page.
How fast can I get funded?
In as little as 24 hours after approval. A complete application with all your statements is the fastest path; see how fast you can get funded.
Can I get a merchant cash advance with bad credit?
Often, yes. We consider credit scores from 500, because the advance is based on your future sales. Strong, consistent deposits matter more than a perfect score. More in business funding with bad credit.
Can I get an advance if I already have one?
Yes. Second position and onward is our strong suit. We look at your total existing payments to make sure a new advance fits your cash flow. See second-position funding.
Can I pay a merchant cash advance off early?
Early payoff discounts are available on a case-by-case basis. Ask before you sign; see paying off an MCA early.