Merchant Cash Advance Loans (MCA) For Good & Bad Credit

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Merchant Cash Advance (MCA) Loans

Merchant cash advances can be used to fill in the gaps to pay employees, purchase office supplies, make urgent repairs or pay utility bills. Be aware, however, that this form of financing should only be used as a last resort and is not ideal for funding recurring expenses.

Merchant Cash Advance Loans (MCA) For Good & Bad Credit

What is a merchant cash advance?

A merchant cash advance gives businesses an upfront advance in exchange for a cut of future credit or debit card sales until the full amount plus fees are paid off.

How does a merchant cash advance work?

With a merchant cash advance (MCA), a lender will advance a certain amount of money to a business. Instead of paying a fixed monthly or weekly payment, however, the borrower will repay the loan using an agreed-upon portion of their monthly or weekly sales.

Is a merchant cash advance legal?

While a merchant cash advance is not illegal, it is not subjected to the same regulations that a loan is subjected to. That’s because this type of advance is legally classified as a sale, so lenders are able to charge significantly higher rates than they could with a typical personal or business loan.

What is the difference between a cash advance and a loan?

With both merchant cash advances and loans, a specific sum is made available to the borrower at one time. However, while a loan is repaid in fixed monthly, weekly or daily installments, the repayment of a cash advance is based on a portion of how much the borrower makes in each revenue cycle.

Benefits of MCAs – Why to Choose One?

  • Quick Money: MCA funds can be made available to a borrower in as little as one business day, with minimal paperwork involved.
  • Easy application: While many traditional business loans may require business owners to provide extensive documentation or even apply in person, most MCA applications are quick, easy, and online.
  • Unsecured, no collateral: MCAs do not require any collateral, meaning that you don’t have to put your personal assets on the line when you sign up for an advance. However, an MCA lender may require you to sign a personal guarantee, meaning that you agree to be fully responsible for the payment of the advance in case of default. In some cases, this could allow a lender to seize your assets.
  • Money arrives quickly: Whereas some business loans may take months after approval to become available, many MCAs can be made available in as little as one day.
  • Credit does not need to be high: Because merchant cash advance approvals are primarily based on your stream of income and revenue statements, this type of lender does not put so much emphasis on an applicant’s credit score. However, most lenders require credit checks and don't offer merchant cash advances without a credit check.
  • Fixed percentage = lower payments with lower sales: This type of loan can be ideal for businesses with unsteady streams of income because payments are based on how much a business makes each month.
  • Flexible payments: In addition to making payments based on your business’ monthly income, MCAs can come with more flexible repayment terms and may be more willing to work with you in case of late payment.
  • High limits: If you’re having trouble getting approved for a large business loan, you may be able to get a higher amount of money advanced to you through an MCA.

Drawbacks of MCAs – Why you may want to avoid

  • High APR: While MCAs provide a fast cash option, are easy to qualify for, and have flexible repayment terms, their interest rates can be in the triple digits. This type of funding is one of the most expensive financing options in the business loan and advance industry.
  • More Sales = Higher Payments: Although lower sales mean lower payments, the opposite holds true for higher sales. This means that if you make a large amount of money in a revenue cycle, a larger portion of that will be taken to repay the advance.
  • Unsecured, no oversight: There is no federal regulation for MCAs, so this type of lender is not legally obligated to be as transparent as traditional business lenders and banks.
  • Easily go into more debt: Due to the complicated repayment structure of an MCA, having higher payments in higher-revenue periods can perpetuate or send a business into a cycle of debt that is difficult to get out of.

What Are Cash Advance Uses?

  • Business expenses, payroll, & other purchases
  • Upgrades & expansion of office space or employees
  • Bills & taxes

What Are the Types of Cash Advances

  • Short term
    • When to use, advantages - Pros/Cons: A short-term cash advance can be used for one-time expenses such as emergency repairs, a gap in payroll funds or equipment repairs. While a borrower repays the loan in a shorter period of time, this also means that payments will be larger.
  • Long term
    • When to use, advantages - Pros/Cons: A long-term cash advance is more difficult to get approved and usually requires decent credit. MCA lenders are typically hesitant to issue this type of advance because the longer the repayment term is, the less likely the advance is to be repaid. If you have strong enough financial qualifications to obtain a long-term advance, you might want to consider applying for some business loans that offer lower or fixed rates.
  • Multiple position
    • When to use, advantages - Pros/Cons: A borrower might take out a second, third, or even fourth position advance when they have existing financing that has not been fully paid off. This type of funding can be useful if you are looking to consolidate debt and have access to a loan that can help you do this at a lower rate than before. However, it becomes easier to fall into the debt cycle if you take out too many loans.
  • Consolidation
    • When to use, advantages - Pros/Cons: Business debt consolidation allows you to take out one large loan to pay off several small loans. This form of financing is only ideal if you are able to get a large loan with a low enough APR to reduce the overall cost of your smaller loans.

How to pay back a merchant cash advance

  • ACH Withdrawal / Split Advance / Lockbox: When you agree to a loan, you may be able to set up auto payments through your bank account using an ACH withdrawal, a split advance, or a lockbox payment, where you send the payment directly to a bank-operated mailing address.
  • Credit card sale percentage
    • Payment period ranges: MCA loan terms typically range between three and 24 months and the payments are usually made on a weekly basis.
    • Pros/Cons: The benefit of this type of borrowing is that you can pay the loan off in a much shorter period of time than with some traditional bank loans. However, this form of repayment can take a bigger chunk out of your weekly or daily earnings than you can afford.
  • Fixed daily withdrawals
    • Payment period ranges: If you’re making fixed daily payments on a merchant cash advance, you’re more likely to be repaying the loan within just a few months.
    • Pros/Cons: While you’ll repay the loan in a very short period of time, you also might be at a higher risk of defaulting on the loan if you’re unable to produce a high enough revenue stream to pay everything back in a timely manner. If you’re behind on other payments, this can also present a higher risk.

Credit Risks

  • Is there a risk to Credit when applying for MCAs? MCA lenders may make a hard credit pull when evaluating your credit. Depending on your credit report and history, this could negatively affect your score.
  • MCAs with Good Credit: If you do have good credit, you might want to consider applying with more traditional lenders who often charge lower rates, are more highly regulated, and can make funds available within a similarly short period of time. Remember that if you have a high revenue stream, as long as you’re not using a loan that charges prepayment fees, you can always pay more of the loan in advance without any negative financial impact.
  • MCAs with Bad/No Credit
    • How does bad credit affect MCA or financing? If you have a bad credit score, an MCA might be one of just a few options. In this case, a lender will look primarily to your revenue stream to make a decision on your application for the advance. You may also be required to offer a personal guarantee in which you agree that the lender may go after your assets in case you default on the loan.

Alternatives to MCAs

For Borrowers With Bad Credit

Loan Amounts $5,000 to $500,000
APR Range As low as 9.99%
Repayment Terms Term loans up to 3 years
Time to Funding As fast as 1 day
Click “Check Rates” to apply to OnDeck

Why OnDeck instead of MCAs?

While rates on MCAs can soar into the hundreds, an OnDeck business loan APR is capped at 99% for term loans and 63% for lines of credit. Payments on both of these forms of financing are fixed, so you’ll know each month how much you have to repay. Additionally, their loans can be made available within just 24 hours of approval and they have loan terms ranging up to 36 months.

Pros of OnDeck:

  • Longer loan terms
  • Lower APRs
  • Fixed payments
Loan Amounts $2,000 to $250,000
APR Range 24% to 99%
Repayment Terms 6, 12, or 18 months
Time to Funding A few minutes to several days
Credit Score 560+
Click “Check Rates” to apply to Kabbage

Why Kabbage instead of MCAs?

Like OnDeck, Kabbage’s term loan APRs are capped at 99% and are also repaid on a fixed-term basis. Their loans can also fund as quickly as just a few minutes.

Pros of Kabbage:

  • Very quick to fund
  • Fixed payments
  • Lower APRs
Loan Amounts $5,000 to $250,000
APR Range 30.00% to 70.00%
Repayment Terms Up to 18 months
Time to Funding As fast as 1 day
Click “Check Rates” to apply to QuarterSpot

Why QuarterSpot instead of MCAs?

QuarterSpot offers term loans with fixed repayment terms and APRs of up to 70%. If you’re approved for a QuarterSpot loan, the overall cost of the loan will more than likely be significantly lower than it would be with a merchant cash advance of similar value.

Pros of QuarterSpot:

  • APR capped at 70%
  • Easy for low-credit borrowers to get approval for
  • Fixed payments
  • Quick to fund

» MORE: Business Loans For Poor Credit

For Borrowers With Unpaid Invoices

Loan Amounts $1,000 to $100,000
APR Range 10.1% to 79.8%
Repayment Terms 3 to 6 months
Credit Score No minimum personal credit score required
Time to Funding A few minutes to several days
Click “Check Rates” to apply to FundBox

Why FundBox instead of MCAs?

FundBox offers invoice financing for amounts of up to $100,000. Instead of relying on your weekly or daily revenue stream to determine the payments, your payments will be made as your clients repay the invoices.

Pros of Fundbox:

  • Dependent on client payments
  • Quick to fund
  • Usually lower cost than MCA

Invoice Factoring
Loan Amounts $20,000 to $5 million
APR Range 15% to 68%
Repayment Terms Up to 13 weeks
Time to Funding N/A
Click “Check Rates” to apply to Blue Vine

Why BlueVine instead of MCAs?

  • BlueVine offers invoice factoring of up to $5 million, even to borrowers with low credit scores. This lender offers more flexible repayment terms and access to a wide range of loan amounts. Pros of BlueVine:
    • High maximum loan amount
    • Quick to fund
    • Online application
    • Will work with low credit borrowers

    » MORE: Compare Invoice Factoring Options

    Other Alternatives to MCAs

    • Short term business loans: With a short-term business loan, you can repay the loan in a shorter period of time than with a traditional business loan, meaning that you’ll usually have the loan paid off within three months.
    • Poor credit business loans: Many lenders are willing to work with borrowers or businesses with bad credit who agree to commit collateral or pay higher rates than a traditional business loan.


    Although a merchant cash advance offers fast cash to borrowers who are in a hurry, this type of funding should be seen as a last resort. Due to the very high-interest rates and frequency of repayments, an MCA can be one of the most expensive forms of financing options.

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