What Is a Merchant Cash Advance?
A merchant cash advance (MCA) provides your business with a lump sum of capital in exchange for a percentage of your future credit and debit card sales. Unlike traditional loans with fixed monthly payments, MCA repayment automatically adjusts based on your daily sales volume.
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This makes merchant cash advances ideal for businesses with fluctuating revenue, such as restaurants, retail stores, and seasonal businesses. When sales are strong, you pay more. During slower periods, payments automatically decrease.
How a Merchant Cash Advance Works
The MCA process is straightforward:
- Apply Online: Complete our simple application in minutes
- Quick Approval: Get a decision in as fast as a few hours
- Receive Funding: Funds deposited directly to your business account
- Automatic Repayment: A fixed percentage (holdback rate) is automatically deducted from your daily card sales
There are no fixed payment amounts or due dates. Repayment happens automatically through your credit card processor or via daily ACH withdrawals based on your sales.
MCA Terms and Structure
Funding Amounts
Equipment Financing Dallas Pros offers merchant cash advances up to $600,000. The amount you qualify for is typically based on your monthly credit card sales and overall business revenue.
Factor Rates
MCAs use factor rates rather than interest rates. Our factor rates start at 1.11. Here’s how it works:
| Advance Amount | Factor Rate | Total Repayment |
|---|---|---|
| $50,000 | 1.15 | $57,500 |
| $100,000 | 1.20 | $120,000 |
| $200,000 | 1.25 | $250,000 |
Factor rates shown are examples. Your actual rate depends on business qualifications and risk factors.
Holdback Rate
The holdback rate is the percentage of your daily credit card sales that goes toward repayment. Typical holdback rates range from 10% to 20% of daily sales.
For example, if your holdback rate is 15% and you process $1,000 in credit card sales on a given day, $150 would go toward your MCA repayment.
Repayment Timeline
Because repayment is based on sales, there’s no fixed repayment term. Most MCAs are repaid within 6 to 18 months, depending on your sales volume and holdback rate.
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Who Should Consider an MCA?
Merchant cash advances are particularly well-suited for:
Restaurants and Food Service
Restaurants experience significant daily and seasonal sales fluctuations. An MCA’s flexible repayment structure matches the ebb and flow of the food service industry.
Retail Stores
From boutiques to hardware stores, retail businesses with substantial card sales can benefit from the quick funding and flexible repayment of an MCA.
Seasonal Businesses
If your business has peak seasons and slower periods, MCA repayment naturally adjusts. Pay more when business is booming, less when it slows down.
Businesses with Lower Credit Scores
MCAs typically have more flexible credit requirements than traditional loans. We can work with FICO scores as low as 500.
Businesses Needing Fast Capital
When you need funding urgently, an MCA delivers. Same-day funding is available for qualified applicants.
Advantages of Merchant Cash Advances
Flexible Payments
Unlike fixed loan payments, MCA repayment adjusts with your revenue. This reduces cash flow stress during slower periods.
Fast Funding
Get approved in hours and receive funding as fast as same-day. When opportunity knocks or emergencies arise, you don’t have to wait.
No Collateral Required
MCAs are based on your future sales, not physical assets. You don’t need to pledge equipment, property, or other collateral.
Simple Qualification
Lower credit score requirements and minimal documentation make MCAs accessible to businesses that might not qualify for traditional financing.
Use Funds for Any Purpose
There are no restrictions on how you use MCA funds. Cover payroll, buy inventory, invest in marketing, or address any other business need.
Understanding the Costs
While MCAs offer speed and flexibility, it’s important to understand the total cost:
Calculating the True Cost
If you receive a $100,000 advance at a 1.20 factor rate with a 15% holdback, you’ll repay $120,000 over time. The $20,000 cost represents the fee for access to capital.
Annual Percentage Rate (APR) Consideration
Because MCA repayment timelines vary based on sales, comparing APRs can be challenging. However, faster repayment through strong sales means a higher effective APR. Consider this when evaluating whether an MCA is right for your situation.
When MCAs Make Sense
MCAs work well when:
- You need capital quickly
- Your business has strong credit card sales
- The opportunity or need outweighs the cost
- You prefer flexible payments over fixed obligations
Qualification Requirements
Our MCA qualification requirements are straightforward:
| Requirement | Minimum |
|---|---|
| Time in Business | 6 months |
| Monthly Revenue | $15,000 |
| Monthly Card Sales | $5,000+ |
| Credit Score | 500+ |
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MCA vs. Other Financing Options
vs. Working Capital Loans
Working capital loans have fixed payments, while MCAs adjust with sales. Working capital loans are often better for businesses with consistent revenue, while MCAs suit businesses with variable income.
vs. Business Lines of Credit
Lines of credit offer revolving access to funds, while MCAs provide a single lump sum. Lines of credit typically require better credit and more documentation.
vs. Equipment Financing
Equipment financing is tied to specific assets, while MCAs can be used for any purpose. Equipment financing typically has lower rates but requires collateral.
Get Your Merchant Cash Advance Today
Ready to access capital based on your future sales? Pre-qualify for a merchant cash advance in minutes with no impact to your credit score.
Our Dallas-based team understands the local business landscape and will help you determine if an MCA is the right solution for your needs. Whether you’re a restaurant owner preparing for a busy season or a retailer needing inventory capital, we’re here to help.
Contact Equipment Financing Dallas Pros today and get the flexible funding your business needs.