Merchant Cash Advance (MCA): The Post-COVID Guide to Using It Safely
MCAs deliver fast capital tied to your card sales. That speed can save a week—or choke cash flow if misused. This page covers what an MCA is, why adoption rose after COVID, who uses it, true costs, pros & cons, smarter alternatives, and FAQs. Below is Everything You Need to Know About Merchant Cash Advance.
What Is a Merchant Cash Advance (MCA)?
An MCA is sales-based financing. You receive a lump sum now, then remit a contracted share of your future card sales (plus a fixed fee) through daily or weekly deductions until the agreed payback is met. It’s not a traditional loan with interest—it’s a purchase of receivables with remits tied to revenue.
Why MCAs Became a Go-To Funding Source After COVID
- Speed & simplicity: streamlined docs and funding in days when banks slowed.
- Revenue-aligned repayments: remits scale with card sales; slower months pay less.
- Underwriting flexibility: strong card volume can offset thinner financials.
- Short-term use cases: fast inventory flips, emergency repairs, time-sensitive gaps.
Who Uses MCAs Most?
Highest fit among card-revenue, fast-turnover businesses:
| Industry | Why MCAs Fit | Typical Use |
|---|---|---|
| Restaurants / Bars | High card mix, daily sales, frequent inventory cycles | Inventory buys, equipment repairs, short-gap payroll |
| Retail (Brick & Click) | Card-heavy sales, promotional inventory turns | Seasonal stock, marketing pushes, cash-flow smoothing |
| Personal & Field Services | Readers on-site, variable weekly demand | Emergency fixes, bridging receivables |
How MCA Pricing Works (Plain English)
MCAs quote a factor rate (e.g., 1.35) on the funded amount, not an interest rate. If you receive $100,000 at 1.35, your total payback is $135,000. Remits are a % of daily/weekly card sales (or fixed debits). The faster you repay, the higher the implied APR appears, because the fee is fixed regardless of time.
| Scenario | Advance | Factor / Payback | Estimated Duration | Implied APR (rough) |
|---|---|---|---|---|
| Base MCA | $100,000 | 1.35 / $135,000 | 9–12 months | ~35–55%+* |
| Faster sales (repay quicker) | $100,000 | 1.35 / $135,000 | 6–7 months | Often higher (fee fixed) |
| Slower sales (longer) | $100,000 | 1.35 / $135,000 | 12–15+ months | Lower, but cash drain lasts |
*Illustrative only. Actual cost varies by remit %, sales speed, fees, and true cash-flow timing.
Pros & Cons
Pros
- Fast approvals & funding
- Remits tied to % of sales
- Light collateral; flexible underwriting
- Useful for short, ROI-positive needs
Cons
- High effective cost (factor ≠ APR)
- Daily/weekly remits can strain cash flow
- Stacking advances multiplies risk
- Poor fit for long-life assets
When to Use (and Avoid) an MCA
| Smart Use | Avoid / Consider Alternatives |
|---|---|
| Short-term inventory that clearly flips fast | Buying equipment/vehicles → equipment loans/leases |
| Emergency repairs preventing downtime | Covering chronic operating losses |
| Marketing with proven 3–6 month payback | Stacking multiple MCAs (cash-flow spiral risk) |
| Bridge to bank/SBA or seasonal cash gap | Long-term needs better served by term loan/LOC |
Lower-Cost Alternatives to Compare
- Equipment Loans/Leases: asset-secured, longer terms, lower rates; match payments to useful life.
- Business Line of Credit: revolving; interest only on what you draw; ideal for working capital.
- Term Loans: predictable payments for projects with clear payback windows.
- Unsecured Business Loans: speed without MCA mechanics for credit-strong owners.
Merchant Cash Advance FAQs: Everything You Need to Know
What is a Merchant Cash Advance?
A merchant cash advance is a type of financing where a business receives a lump sum upfront in exchange for a percentage of future credit and debit card sales. Repayment amounts flex with revenue.
How Does a Merchant Cash Advance Work?
After approval, you receive a cash advance which you repay through a portion of your daily card receipts until the total agreed-upon amount (advance + fees) is paid. Slower periods mean lower remits.
What Are the Advantages?
- Fast approval & funding (days)
- No collateral required
- Payments adjust with sales volume
- Approval focuses more on sales history
What Are the Potential Drawbacks?
- Higher costs (factor-rate pricing often exceeds loan APRs)
- Short repayment terms with frequent remits
- Cash-flow impact if sales dip
Who is Eligible?
Businesses with consistent card transactions—restaurants, retail, personal services—tend to qualify. Eligibility depends more on sales volume and stability than personal credit alone.
How to Apply with Liberty Capital Group?
You can begin online and our team will guide you step-by-step. Visit our dedicated MCA service page or use the application form below.
Are There Alternatives?
- Traditional Bank Loans
- Business Lines of Credit
- Invoice Financing
- SBA Loans
For broader funding insights, see Business Financing Options and the SBA.
Post-COVID Snapshot
| Usage | Demand rose as banks tightened. |
| Sectors | Restaurants, retail & services show highest fit. |
| Costs | Factor-rate pricing can imply high APRs. |
| Cash-Flow | Daily/weekly remits increase strain in slow weeks. |
Fast Checklist
- 3–6 months recent bank statements
- Card processing statements (if %-of-sales remit)
- Government ID & entity docs
- List of current obligations (avoid stacking)
- Clear use of funds with near-term ROI
Compare Side-by-Side
| Product | Speed | Cost | Best For |
|---|---|---|---|
| MCA | Fastest | Highest | Short-term, card-driven needs |
| Equipment Loan/Lease | Fast | Lower | Tools/vehicles with long life |
| Business LOC | Moderate | Lower–Medium | Flexible working capital |
| Term Loan | Moderate | Medium | Predictable project financing |
Apply or Request a Custom Quote
No cost to apply. We’ll show MCA vs. lower-cost options side-by-side.
Recent Blogs
- Everything You Need to Know About Merchant Cash Advance – FAQ’s
- What Are The Eligibility Requirements For Obtaining A Merchant Cash Advance?
- Can I Qualify for a Merchant Cash Advance with Bad Credit?
- What Are The Pros and Cons of Merchant Cash Advances?
- How Soon Can I Get Cash with a Merchant Cash Advance?
