What Is a Merchant Cash Advance? A Plain-English Guide
A merchant cash advance (MCA) is a way for a business to receive a lump sum of working capital in exchange for a portion of its future receivables. Instead of a traditional loan with a fixed monthly schedule, the funder purchases a share of future sales and is paid back through an agreed portion of revenue or an agreed remittance schedule until the purchased amount is reached.
This guide explains how that works in plain English, what funders usually review, the advantages and the trade-offs, and the questions worth asking before you sign anything. Forward Funders arranges merchant cash advance options from $25K to $5M for businesses in all 50 states.
The short answer
A merchant cash advance provides capital up front. In return, the funder collects an agreed share of your future receivables. Because the agreement is tied to your business's revenue, funders focus on how your business performs, not only on your credit history.
How a merchant cash advance works
You apply. You complete one application with your business details and recent bank statements.
Funders review your file. Each funder looks at your deposits, time in business and other details, and decides whether to make an offer.
You receive any offers. An offer states the amount, the portion of receivables being purchased and how remittances are collected.
You review the written agreement. Take the time to read it and ask questions before you decide.
You receive the funds and remit as agreed. Remittances continue until the purchased amount is reached.
Other names you may hear
The same product is sometimes called a business cash advance, revenue-based financing, a working capital advance or a purchase of future receivables. Names vary by funder, so focus on what the written agreement says rather than the label.
Want a quick reference for terms like holdback, remittance and stips? See our merchant cash advance glossary.
How repayment is structured
Agreements generally use one of two approaches. In a split arrangement, the funder collects an agreed portion of your card sales, so remittances rise and fall with your sales. In a fixed arrangement, an agreed remittance is collected on a regular schedule, such as daily or weekly. Which one applies depends on the funder, and the written terms control. Ask which structure you would have and how it fits your cash flow.
What funders usually review
Consistent deposits into your business bank account
Time in business and how your revenue has trended
Seasonality and the type of business you run
Card processing history, if you accept cards
Other obligations your business already has
Credit is reviewed as one factor. Each funder sets its own requirements, so two funders can look at the same file and respond differently.
Curious how a funder reads your deposits and balances? Read what funders look for in business bank statements.
What business owners use the funds for
An MCA is working capital, so owners use it for many needs. Common examples include inventory, equipment, payroll, marketing, renovations and covering seasonal gaps. You can see how this looks in practice for restaurants, retail stores, trucking companies, construction companies and e-commerce businesses, or browse every industry in our states and industries directory.
Advantages of a merchant cash advance
A shorter application. The process centers on your bank statements rather than a long package of financial documents.
Revenue-based review. Funders look closely at how your business performs.
Flexible use of funds. The capital is working capital you can direct where your business needs it.
Timing can be quicker than other options. Timing varies by funder and by file, and no timeline is promised.
Trade-offs to understand
Cost can be higher than traditional financing. Compare the total amount to be remitted across every offer, not just the amount advanced.
Remittances affect cash flow. Ask how often remittances are collected and what happens during a slow week.
Agreements are not standardized. Terms differ from funder to funder, so read each one in full.
An offer is never certain. Submitting an application does not ensure an offer.
If you are weighing other kinds of financing, our guide to merchant cash advance vs. business loan compares them side by side.
Is a merchant cash advance right for your business?
It may be worth exploring if your business has steady deposits, you have a clear use for the capital and you are comfortable with the way remittances are collected. It may not be the right fit if you qualify for lower-cost traditional financing and are not in a hurry, or if your cash flow could not comfortably handle regular remittances. Talking it through before you apply costs nothing, and it is fine to decide an advance is not for you.
Questions to ask before you sign
What is the total amount I will remit, and how is it collected?
How often are remittances collected, and can anything change them?
What happens if my sales slow down?
Are there any fees besides the amount stated in the agreement?
What happens if I want to pay the balance sooner?
Who will I contact with questions after funding?
What to have ready
Start with a completed Funding Application and your last four months of business bank statements. Month-to-date activity is only needed after the 10th of the month (from the 11th onward). That short list is a starting point, not a promise that every funder asks for the same items. See Your Funding Application: What to Send and Your Merchant Cash Advance Application Journey.
Frequently asked questions
What is a merchant cash advance in simple terms?
It is a lump sum of working capital provided in exchange for a share of your future receivables. The funder is paid back through an agreed portion of revenue or an agreed remittance schedule until the purchased amount is reached.
Is a merchant cash advance a loan?
It is usually structured as a purchase of future receivables rather than a loan, which is why the agreement reads differently from a loan agreement. Read the written agreement closely and ask the funder to explain anything that is unclear.
How much can a business receive?
Forward Funders arranges merchant cash advance options from $25K to $5M. The amount you may be offered depends on your business's deposits and each funder's review.
Who can apply?
Businesses in all 50 states with consistent deposits into a business bank account can apply. Each funder sets its own requirements, and approval is not guaranteed.
What do I need to apply?
Start with a completed Funding Application and your last four months of business bank statements. Month-to-date activity is only needed after the 10th of the month.
How long does it take?
Timing depends on the funder, how complete your application is and how quickly questions are answered. Once a funder approves, funding typically happens within 24 to 48 hours. Our guide to how long business funding takes walks through each step.
What if my credit is not perfect?
Credit is reviewed as one factor. Funders also look at your deposits, time in business and recent bank statements, and each funder sets its own requirements. Approval is not guaranteed.
Can I use the funds for anything?
A merchant cash advance is working capital, so owners use it for needs such as inventory, equipment, payroll, marketing and renovations. Your agreement may include its own terms, so read it carefully.
Want a realistic idea of timing? Read how long business funding takes.
Ready to start? Complete the Funding Application, or call (718) 619-9867, Monday through Saturday, 8am to 8pm.
Funders make the decisions and provide the written agreements. Availability, amounts and timing depend on the funder and your business information, and submitting an application does not ensure an offer.