A merchant cash advance is not a loan. It is the purchase of a set amount of your future card receipts, remitted as a share of what you take rather than on a fixed schedule. That shape fits some businesses well and others badly, so this page explains it plainly.
Illustrative diagram of the structure. Amounts, shares and costs are decided at review, and nothing here is an offer of credit or of financing.
Four properties, and between them they explain every difference between an advance and every other way of funding a business.
An advance provides money now in exchange for a specified amount of the card receipts the business will take later. It is a purchase rather than a loan, and almost everything that surprises merchants about these arrangements follows from that one fact.
Written down like that it sounds like a technicality. It is not. It changes how the cost is expressed, whether the cost can fall, when the arrangement ends, and what happens in a month when the sales do not arrive — which are the four things anybody signing one needs to have understood in advance.
Availability, amounts, the share remitted and the cost are decided at review and differ between businesses. No approval, amount, share, cost or timeframe is promised on this page, and nothing here is an offer of credit or of financing.
Comparing an advance against a loan using a loan's vocabulary produces a number that is either meaningless or misleading. These are the five things that genuinely differ, and each one is a question worth asking out loud before signing.
Written without timings. How long any of this takes depends on how completely the business can be documented, which is the part you control.
What the money is for, and when it is needed. A specific purpose reviews far better than a general request, and it often shows that a different structure fits better.
The business, its ownership and its trading history, submitted as one file rather than in pieces over a fortnight.
Business bank statements and processing statements, because card volume is what an advance is assessed against and what it is remitted from.
Card volume, how consistent it is, time in business and existing obligations — including any advance already running, which matters more here than almost anywhere else.
If it proceeds, the amount, the share remitted and the total cost are set out in writing. Where a state requires standardised commercial financing disclosures, they come with it.
The agreed share of card takings is remitted until the purchased amount has been delivered in full.
Nothing here is an offer of credit or of financing. Availability, amounts, shares and costs are decided at review and differ between businesses. An application may be approved, declined, or approved on a structure different from the one discussed. Read the agreement, and ask for anything you have been told verbally to be written into it.
An advance is easy to sell and easy to regret, and the difference is almost always whether the merchant understood what they were signing. The conversation here starts with what the structure does to your cash flow — and quite often it ends with a different kind of funding, because that was the honest answer.
Three of these are about cost, and they are the three worth reading twice.
Working CapitalNo, and the distinction is structural rather than a marketing preference. An advance is the purchase of a specified amount of your future card receipts. Money is provided now; a share of card takings is remitted until the purchased amount has been delivered. There is no principal, no interest rate and no amortisation schedule, because nothing is being borrowed.
That is why the vocabulary matters. If somebody describes an advance to you using the words "loan", "interest" or "APR" without qualification, they are either being loose or hoping you will compare it against the wrong thing.
As a fixed total to be delivered, agreed before anything starts, rather than as a rate that accrues over time. The figure depends on the business, its card volume, how consistent that volume is and how long it has been trading, which is why no number appears anywhere on this page. Ask for it as a dollar amount — the total you will have remitted when the advance is complete — because that is the only form of the answer that cannot be misread.
Generally no, and this is the most expensive misunderstanding a business can carry into one of these. Because the cost is a fixed amount rather than interest accruing over a period, delivering it sooner usually means paying the same total in less time — which raises the effective cost rather than lowering it. Some arrangements offer a discount for early settlement and many do not. Ask before you sign, and get the answer in writing.
Remittance follows the takings, so a quieter month remits less. That is the practical advantage of the structure and the reason it suits seasonal businesses: there is no fixed debit that has to be met whether or not the sales arrived. The corresponding disadvantage is that the finish line moves — a slow run does not reduce what is owed, it extends how long the remittance continues.
Usually not. Because remittance is a share of sales rather than a schedule, the completion date depends on how the business trades. Predictability is the thing being traded away, and it is worth deciding deliberately whether that is a trade your business wants to make.
A growing number of states now require providers of commercial financing — including merchant cash advances — to give standardised disclosures before an agreement is signed. Where those rules apply, they generally cover the total amount of financing, the amount actually disbursed after fees, the finance charge, an estimated annualised cost and the payment schedule.
The requirements differ by state and have been changing, so nothing here is a statement of what applies to you. What is worth taking from it is the habit: ask for those figures in writing before signing anything, whether or not your state currently obliges anyone to volunteer them.
Decided at review, on the specific business — its card volume, how consistent that volume is, how long it has traded and what it already owes. No amount, share or cost appears on this page, because a figure given before a review is a guess dressed up as an answer. Nothing here is an offer of credit or of financing.
It depends on which risk suits the business. An advance flexes with your revenue and costs a fixed total whenever it completes. Term funding is a fixed amount on a fixed schedule — predictable, and unmoved by a quiet month. A business with strong seasonality often prefers the first; a business with steady, predictable revenue often prefers the second. Neither is better in the abstract, and the answer for your business comes out of a review rather than out of a page.
A purchase. Not a loan. Know the difference.
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