Fastest
Merchant cash advance, explained without the sales pitch
A merchant cash advance is not a loan. It is the purchase of a portion of your future receivables at a discount, repaid through a percentage of daily card sales or a fixed daily ACH debit. It is the fastest money available to a small business and among the most expensive. It fits a genuine emergency with a clear payoff, and it fits very little else.
- Amount
- $5,000 – $500,000
- Term
- 3 – 12 months typical
- Payment
- Daily, as a % of sales or fixed ACH
- Decision
- Often same day
- Funding
- 1 – 2 business days
- Legal structure
- Purchase of receivables, not a loan
How it works
The funder buys a set dollar amount of your future receivables for a discounted amount today. You receive, for example, $50,000 today against $67,500 of future receivables. Repayment happens automatically — either as a holdback percentage of daily card settlements, or as a fixed daily or weekly ACH debit.
Holdback versus fixed ACH
This distinction matters more than most owners realise. A true holdback takes a percentage of what you actually sell, so a slow week costs you less. A fixed ACH takes the same amount whether you had a good day or an empty one.
Most of what is marketed as a merchant cash advance today is fixed ACH. Ask which one you are being offered and get the answer in the contract.
Reconciliation
Some agreements include a reconciliation clause that adjusts your payment if revenue drops. Some do not. Two offers with identical factor rates are not equivalent if one reconciles and the other does not. This is one of the most consequential and least discussed terms in the category.
Who it fits — and who it doesn't
Good fit when
- A genuine emergency where being closed costs more than the capital
- A short, specific opportunity with a return you can defend
- Heavy card volume and a true holdback structure available
- You have modelled the daily payment against a bad month, not a good one
Wrong tool when
- Covering a shortfall that is still getting worse
- Paying off another advance — stacking is how this goes badly
- Any need where you could wait two weeks for cheaper money
- Thin-margin businesses where the daily debit eats the margin
- Long-term investment: the term is far too short
The cost, plainly
This is the most expensive money in the small business channel and there is no version of this page that pretends otherwise.
Factor rates commonly run from around 1.15 to 1.49. On short terms those numbers annualise into triple digits. That is a function of the structure — the fee is fixed up front and repayment starts immediately, so you pay the full cost for the use of roughly half the money over the term.
Before signing anything, run it: the advance payment calculator shows the daily debit and what share of your revenue it consumes. If that share is above 20%, think very hard.
Rates and terms are set by the funding partner and vary based on your business. Nothing here is an offer of credit.
Businesses that use it
Straight answers
Is a merchant cash advance a loan?
Legally, no. It is structured as a purchase of future receivables, which is why it is not governed by lending statutes in the same way and why the cost is expressed as a factor rate rather than an interest rate. Practically, money arrives and money leaves — but the legal distinction affects your rights and it is worth understanding.
What is stacking and why does it matter?
Stacking is taking a second advance while a first is outstanding. Most agreements prohibit it and many treat it as a default event. It also compounds the underlying problem: two daily debits against the same revenue. If you are considering a second advance to cover the first, that is the moment to get advice rather than sign.
What is a confession of judgment?
A document in which you consent in advance to a judgment against you if you default, allowing the funder to move directly to collection without suing first. Their use has been restricted in some contexts and jurisdictions. If one is in your paperwork, have an attorney look at it before you sign.
Can I get out of an advance early?
You can pay it off, but on most structures you pay the full agreed amount regardless of timing, so there is no saving unless a discount is written into the contract. Check for an early payoff provision before signing rather than after.