Merchant Cash Advance: How It Works, Factor Rates and How to Qualify
A lump sum against your future sales, priced with a factor rate. It is a purchase, not a loan.
Soft credit pull only, no obligation
Rates, factor rates, fees and terms are set by the funding provider that makes your offer and are disclosed in that provider's agreement. Figures on this page are illustrative ranges from providers in our network, not offers. A merchant cash advance is not a loan and charges no interest; any annualized figure is for comparison only.
- Same-day decisions
- from some providers
- Subject to provider approval and document turnaround.
- 700+
- industries served
- Reviews
At a glance
| Typical amount | $10K–$500K, depending on the funding provider |
|---|---|
| Estimated payback period | 3 to 18 months, depending on the funding provider |
| Speed | same-day decisions from some providers, with funding as fast as 6 hours, subject to provider approval and document turnaround |
| Minimum time in business | 12 months, considered by some providers |
| Minimum monthly revenue | $15,000, considered by some providers |
| Credit considered from | 525, considered by some providers |
| Collateral | None pledged; the provider purchases future receivables |
| Cost expressed as | Factor rate, not an interest rate |
| Structure | Purchase of future receivables |
|---|---|
| Remittance | Daily or weekly, by fixed ACH or as a percentage of card settlements |
Some providers consider applications at these minimums. Meeting a minimum does not guarantee an offer.
How a merchant cash advance works
Definition
A merchant cash advance is the purchase of a fixed amount of a business's future receivables. The funding provider pays a lump sum now, the funded amount, and collects an agreed total, the payback amount, out of future sales.
There is no interest rate and no fixed maturity date: the transaction is a sale, not a loan.
What does the provider buy?
A set amount of your future revenue. The agreement names the funded amount, the payback amount and the share collected.
Read moreRead less
That structure is why the provider looks first at your bank statements: are your deposits steady enough to deliver the receivables it is buying? Your credit profile matters, but it is one input rather than the gate.
What are the three numbers?
Every offer reduces to three figures, and they are all you need to compare offers side by side.
Read moreRead less
- Funded amount — the lump sum deposited in your business account.
- Factor rate — the multiplier that sets the total cost.
- Payback amount — the funded amount multiplied by the factor rate.
If an offer is hard to compare, ask the provider to restate it as these three numbers plus the remittance.
Why is an advance not a loan?
Three structural facts, all of which appear in the purchase agreement you sign with the provider.
Read moreRead less
- It is a purchase, not a promise to pay. The document is a receivables purchase agreement, not a promissory note.
- The price is a factor rate, not an interest rate. The cost is fixed when you sign.
- There is no maturity date. Remittance runs until the payback amount is collected.
It changes how early payoff works, how the transaction is taxed, and which disclosures the provider owes you.
How much you can get, and over how long
The range and payback period above are the outer edges of the network, depending on the funding provider, rather than a range you choose from.
The amount and the factor rate offered follow
- Deposit consistency
- Time in business
- Your industry
- Your credit profile
- Existing positions
A shorter or a longer payback?
A shorter payback
Concentrates the payback amount into larger remittances.
A longer payback
Spreads it into smaller remittances, usually at a higher factor rate.
Tied to card settlements, the real period stretches when sales slow and shortens when they rise.
Two habits that help any file
Ask for what the need costs, not the largest advance you can get: providers read an inflated request as a weak one.
Test the remittance against your slowest week before you argue about the amount.
Decisions from some providers the same day, depending on the provider.
Subject to provider approval and document turnaround.
What a merchant cash advance costs
The factor rate is set by the provider and disclosed in your agreement. Several states also require a standardised disclosure with the offer, among them California and New York; the state list links each law.
A factor rate
Multiply the funded amount by the factor rate and you have the payback amount.
Set once, at signingThe cost of the advance
The payback amount minus the funded amount. It does not move after signing.
Paying early saves only where a discount is offered
On top of the factor rate, depending on the funding provider
- Origination fee
- ACH fee
Where a provider charges an origination or ACH fee, that fee is stated in the same agreement.
$100,000 funded with a $130,000 payback amount means $30,000 is the cost of the advance. Illustrative example, not an offer.
Compare two offersTwo cost questions to ask
Is a fee deducted from the funded amount or added to the payback amount? Is there an early-payoff discount, and on what terms? Both answers belong in the agreement, not in a phone call.
An annualized figure
An annualized figure can be estimated from the funded amount, the payback amount and the estimated payback period, for comparison only. A short payback period makes it look large even though the dollar cost is fixed and known in advance.
Consolidating advances
Some providers in our network can consolidate existing advances into a single financing product with one remittance schedule. The new provider pays off the existing positions and states its own factor rate and fees; providers generally require you to net a minimum share of the new funding after those payoffs.
Whether consolidation lowers your total cost depends on the payoff amounts and the new terms. Merchant Cash Advance Consolidation walks through it.
A worked example: two offers for the same money
Same funded amount, nothing else the same.
Try an amount
Illustrative example, not an offer. Factor rates, fees and remittance schedules are set by the funding provider that makes your offer and are disclosed in that provider's agreement.
Offer A
A lower factor rate over a shorter payback period
$5,000/wk
26 weekly remittances
$130,000
payback amount
- Funded amount
- $100,000
- Deducted at funding
- None
Offer B
A higher factor rate, collected in smaller remittances
$2,750/wk
52 weekly remittances
$143,000
payback amount
- Funded amount
- $100,000
- Deducted at funding
- None
Neither offer wins on its own
A fits if the need pays for itself quickly and your deposits can carry the larger remittance.
B fits if the smaller remittance is the one your slowest week can carry. It costs more in total.
Test it against your own numbers
Take the lowest-deposit week in the statements the provider will ask for, subtract payroll, rent, stock and every existing remittance, and see which remittance still clears.
If two offers differ on both the funded amount and the factor rate, compare the payback amount and the remittance, not the factor rate alone.
Who qualifies for a merchant cash advance
| 12 mo | time in business |
|---|---|
| $15K | monthly revenue |
| 525 | credit score |
Plus three months of bank statements (four in CA, NY, FL and GA with some providers), a government ID and a business account in the United States.
Some providers consider applications at these minimums. Meeting a minimum does not guarantee an offer.
What strengthens a file
In the order providers tend to weigh it.
Consistent deposits.
Every month, not just the best one.
Few negative days.
And few overdrafts.
Clean, complete statements.
Full months, every page, no screenshots.
Few or no existing positions.
Existing advances reduce the amount; some providers decline stacked files.
An industry the provider accepts.
One provider's restriction is often routine for another.
A personal guarantee.
Commonly required, though some products are offered without one.
How to apply for a merchant cash advance
We check your options with a soft credit pull only, so looking does not change your score.
What you'll send
- three months of bank statementsfour in CA, NY, FL and GA with some providers
- A government ID
Send them complete
- Complete months
- All pages
- No screenshots
Worth asking before you sign
Does the provider report remittance history to business credit bureaus? Capital Gurus reports to none.
If you want a specialist to read an offer with you before you sign, talk to a funding advisor.
Apply once
about 5 minutesOne application reaches the providers in our network whose guidelines fit your revenue, industry and credit profile.
Send your statements
Send the bank statements and the ID in the panel: complete months, every page, no screenshots.
Review the file
same-day decisions from some providersA funding specialist confirms the amount, the use of funds and any existing positions.
subject to provider approval and document turnaround.
Compare the offers and sign
as fast as 6 hours with some providersYour specialist walks you through the offers side by side; you sign with the provider you choose, and that provider funds your account. Its agreement governs the transaction.
- Funded amount
- Factor rate
- Payback amount
- Remittance
- Fees
- Early payoff
- Guarantee
depending on the funding provider, subject to provider approval and document turnaround.
When an advance is the right tool, and when it is not
An advance fits a fast, short, revenue-generating need.
| Ask yourself | Good use | Not for |
|---|---|---|
| Is the need fast and short? |
|
|
| Will it generate revenue? |
|
|
| Is it one-off? |
|
|
Is the need fast and short?
- Payroll before a receivable lands.
- A repair that stops the business until it is done.
- Long-term capital. A building or a multi-year expansion against a short remittance squeezes the cash flow you are protecting.
Will it generate revenue?
- Inventory for a season that has already started.
- A job that needs materials on Monday.
- Refinancing a long obligation against a short, revenue-tied remittance.
Is it one-off?
- A one-off, urgent, revenue-generating need.
- An ongoing need. Standby capital usually costs less, though providers require a stronger credit profile for it.
Better fit elsewhere
- Seasonal or card-heavy revenue a fixed remittance would strainUse insteadRevenue-based financingwhere remittance follows sales
- A recurring gap you want standing capital forUse insteadBusiness line of creditdrawn only when you need it and redrawn as you pay it down
- Cash tied up in unpaid B2B invoicesUse insteadInvoice factoringwhich settles when your customer pays
An advance is priced with a factor rate and has no maturity date.
Daily, weekly or a share of sales: how the payback is collected
Remittance is collected automatically until the payback amount is reached, over an estimated 3 to 18 months, depending on the funding provider.
- Every business day
A fixed daily ACH
The same fixed amount leaves your business account, whatever that day's sales.
- Every week
A fixed weekly ACH
The same fixed debit in fewer, larger remittances, with a week of sales between them.
- Follows sales
A share of sales
A share of your card settlements (the holdback) or revenue, usually with a reconciliation clause.
Revenue-based financing explains the share-of-sales structure on its own page.
Merchant cash advance vs. other options
| Compare | Merchant cash advance | Line of credit | Invoice factoring |
|---|---|---|---|
| What it is | Purchase of future receivables | Revolving credit you draw and redraw | Advance against unpaid B2B invoices |
| Typical amount | $10K–$500K | $10K–$5M | Follows the invoices you factor |
| Cost expressed as | Factor rate | A rate or a fixed cost of funds, plus any draw or maintenance fee | A factoring fee for each period the invoice stays open |
| Relative speed | same-day decisions from some providers | Slower to open; draws are quick once the line is in place | Slower to set up, then invoice by invoice |
| Best for | A one-off, urgent, revenue-generating need | A recurring gap you want standing capital for | 30- to 90-day B2B invoices |
- What it is
- Purchase of future receivables
- Typical amount
- $10K–$500K
- Cost expressed as
- Factor rate
- Relative speed
- same-day decisions from some providers
- Best for
- A one-off, urgent, revenue-generating need
- What it is
- Revolving credit you draw and redraw
- Typical amount
- $10K–$5M
- Cost expressed as
- A rate or a fixed cost of funds, plus any draw or maintenance fee
- Relative speed
- Slower to open; draws are quick once the line is in place
- Best for
- A recurring gap you want standing capital for
- What it is
- Advance against unpaid B2B invoices
- Typical amount
- Follows the invoices you factor
- Cost expressed as
- A factoring fee for each period the invoice stays open
- Relative speed
- Slower to set up, then invoice by invoice
- Best for
- 30- to 90-day B2B invoices
Amounts, costs and terms in this comparison depend on the funding provider and are disclosed in that provider's agreement. Speeds are subject to provider approval and document turnaround.
Merchant Cash Advance vs. Business Line of CreditRelated financing
- business line of credit
Standby capital you draw only when you need it, then draw again.
- working capital financing
Cash for payroll, stock and the gaps between deposits and bills.
- invoice factoring
Turn unpaid invoices into working cash, sized by the invoice.
Merchant cash advances by industry
Acceptance for advances is industry-specific. Four segments account for much of the volume.
Restaurants & Food ServiceCard-heavy revenue suits a holdback.
Retail StoresStock ahead of a selling season.
Auto Repair & Automotive ServicesParts and lifts, needed the same week.
Grocery & Convenience StoresSteady deposits, fast-turning stock.
Salons, spas and personal services follow the same pattern. Most providers restrict transportation and logistics, real estate, law firms, cannabis and non-profits, though one may accept what another restricts.
Can an LLC or a business with only an EIN get an advance?
Yes; entity type rarely decides. Providers fund LLCs, corporations and sole proprietors, but an EIN alone is not enough: they verify the owner, check personal credit with a soft credit pull only and read the bank statements.
What providers ask for in an applicationMerchant cash advance questions
In short
A merchant cash advance is a purchase of future receivables, not a loan. A provider advances a lump sum and collects a fixed payback from sales. Cost is set with a factor rate rather than an interest rate. Advances from $10K–$500K are considered, depending on the funding provider, with same-day decisions from some, subject to provider approval and document turnaround.
Is a merchant cash advance a loan?
No. An advance is the purchase of a fixed amount of your future receivables, documented as a purchase agreement rather than a promissory note. The provider pays a funded amount now and collects an agreed payback amount out of future sales. The price is a factor rate, not an interest rate, and no interest is charged.
What is a factor rate?
A factor rate is a decimal multiplier that sets the whole cost of an advance: multiply the funded amount by it to get the payback amount. $100,000 funded with a $130,000 payback amount means $30,000 is the cost of the advance. Illustrative example, not an offer. The factor rate is set by the provider and disclosed in your agreement.
How is the payback collected?
By remittance rather than by a monthly bill. Depending on the funding provider, a fixed amount leaves your business account every business day or every week by ACH, or the provider takes an agreed percentage of your card settlements. Remittance continues until the payback amount is reached, over an estimated 3 to 18 months.
Do advances affect my credit?
Checking your options through Capital Gurus uses a soft credit pull only, which does not change your score. Whether a provider reports remittance history to the business credit bureaus depends on that provider, so an advance does not necessarily build business credit either. Ask which applies before you sign.
What if my sales drop?
Contact the provider before a remittance is missed. Agreements tied to a percentage of card settlements usually include a reconciliation clause that adjusts the remittance when sales fall, and fixed-ACH agreements may allow a temporary adjustment if you ask early. What happens on default, including any personal guarantee, is set out in your agreement. This is general information, not legal advice.
Can I pay it off early?
It depends on the funding provider. The payback amount is fixed when you sign, so remitting faster does not automatically reduce it. Some providers offer an early-payoff discount, and where they do it is stated in the agreement. Ask your funding specialist to confirm the early-payoff terms of each offer before you choose one.
Can I get an advance with bad credit?
Often, yes. Providers of advances decide mainly on your bank deposits, so credit carries less weight than it does for other products. Some providers in our network consider credit from 525 with 12 months in business and $15,000 in monthly revenue. Weaker credit generally means a higher factor rate and a shorter payback, depending on the funding provider.
Still have a question?
talk to a funding advisorFund the urgent need: see which advance offers fit your business.
about 5 minutes, soft credit pull only · talk to a funding advisor